Question

Problem 15-22 Return on investment LO 15-6

Gibson Corporation’s balance sheet indicates that the company has $580,000 invested in operating assets. During 2018, Gibson earned operating income of $67,280 on $1,160,000 of sales.

Required

1. Compute Gibson’s profit margin for 2018.
2. Compute Gibson’s turnover for 2018.
3. Compute Gibson’s return on investment for 2018.
4. Recompute Gibson’s ROI under each of the following independent assumptions:
   (1) Sales increase from $1,160,000 to $1,392,000, thereby resulting in an increase in operating income from $67,280 to $76,560.
   (2) Sales remain constant, but Gibson reduces expenses, resulting in an increase in operating income from $67,280 to $69,600.
   (3) Gibson is able to reduce its invested capital from $580,000 to $464,000 without affecting operating income.

Complete this question by entering your answers in the tabs below. Req A to C ReqD Compute Gibson's profit margin, turnover and return on investment for 2018. (Round "Profit margin" and "Return on investment" to 1 decimal place.) a. Profit margin b. Turnover c. Return on investment times << Reg A to C ReqD> Complete this question by entering your answers in the tabs below. Req A to C Req D Recompute Gibson's ROI under each of the following independent assumptions: (Do not round intermediate calculations. Round your answers to 2 decimal places. (i.e., .2345 should be entered as 23.45).) (1) Sales increase from $1,160,000 to $1,392,000, thereby resulting in an increase in operating income from $67,280 to $76,560. (2) Sales remain constant, but Gibson reduces expenses, resulting in an increase in operating income from $67,280 to $69,600. (3) Gibson is able to reduce its invested capital from $580,000 to $464,000 without affecting operating income. Show less A Return on Investment (1) (2) (3) < Req A to C ReqD>

Answer 1

ANSWER

Answer A to C
Operating income	$67,280
Divided by: Sales	$1,160,000
Profit margin	5.80%
Sales	$1,160,000
Divided by: Operating assets	$ 580,000
Turnover	2.00
Profit margin	5.80%
Multiply: Turnover	2.00
Return on investment	11.60%
Answer D1
Operating income	$76,560
Divided by: Sales	$1,392,000
Profit margin	5.50%
Sales	$1,392,000
Divided by: Operating assets	$580,000
Turnover	2.40
Profit margin	5.50%
Multiply: Turnover	2.40
Return on investment	13.20%
Answer D2
Operating income	$69,600
Divided by: Sales	$1,160,000
Profit margin	6.00%
Sales	$1,160,000
Divided by: Operating assets	$580,000
Turnover	2.00
Profit margin	6.00%
Multiply: Turnover	2.00
Return on investment	12.00%
Answer D3
Operating income	$67,280
Divided by: Sales	$1,160,000
Profit margin	5.80%
Sales	$1,160,000
Divided by: Operating assets	$464,000
Turnover	2.50
Profit margin	5.80%
Multiply: Turnover	2.50
Return on investment	14.50%

_____________________________________________

If you have any query or any Explanation please ask me in the comment box, i am here to helps you.please give me positive rating.

*****************THANK YOU**************