Question

Question 33 Return on investment is often expressed as follows: Controllable margin Average opcrating asscts Controllable margin Salcs Sales Averege operating asscts (b1) Comparative data on three companies operating in the same industry follow. The minimum required ROI is 10% or all three companies Determine the missing ฮmounts. Round asset turnover of Company B הnd return on investment of Company C to 1 decimal place, e.g. 15.2 or 15.2% and all other answers to 0 decimal places, eg. 152. Enter negative amounts using either a negative sign preceding the number e.g. 45 or parentheses e.g. (45).) Company A Company B Company C Sales Net operating income Average operating assets Profit margin Assets turnover $1,408,000 S154,880 5704,000 5688,200 S130,758 54,863,00o % (e) 0.6 % Returr on investrment i) Residual income

Answer 1

	Company A
Sales	$       14,08,000
Net operating income	$         1,54,880
Average operating assets	$         7,04,000
Profit margin = 154880/1408000 =	11.00%
Assets turnover = 1408000/704000 =	2.00
Return on investment = 154880/704000 =	22.00%
Residual income = 154880-704000*10% =	$             84,480
	Company B
Sales	$         6,88,200
Net operating income	$         1,30,758
Average operating assets = 130758/1.9% =	$       68,82,000
Profit margin = 130758/688200 =	19.00%
Assets turnover = 688200/688200 =	1.00
Return on investment	1.90%
Residual income = 130758-6882000*10% =	$        -5,57,442
	Company C
Sales = 4863000*5 =	$   2,43,15,000
Net operating income =24315000*.6% =	$         1,45,890
Average operating assets	$       48,63,000
Profit margin	0.60%
Assets turnover	5.00
Return on investment = 145890/4863000 =	3.00%
Residual income = 145890-4863000*10% =	$        -3,40,410