In: Accounting

Computing profit Margin, Turnovers, and Return on investments

Munoz Corporation’s balance sheet indicates that the company has $600,000 invested in operating assets. During Year 2, Munoz earned operating income of $72,000 on $1,200,000 of sales.



  1. Compute Munoz’s profit margin for Year 2.

  2. Compute Munoz’s turnover for Year 2.

  3. Compute Munoz’s return on investment for Year 2.



Expert Solution

a. Profit Margin

Margin= Operating income / Sales

M= 72,000 / 1,200,000

M= 0.06 or 6%

b. Turnover

Turnover = Sales / Operating Assets

T= 1,200,000600,000 

T= 2 times

c. Return on investment

ROI= Margin x Turnover

ROI = 6.0% x 2 times

ROI= 12.0%



The Profit Margin is 6.0%

The Turnover is 2 times

The Return on Investment is 12.0%

Related Solutions

Accounting For Not For Profit Organisation
State the meaning of ‘Not - for - Profit’ Organisations.
Functions of Profit in Economy.
What are the Functions of Profit in Economy? Describe in detail.   
Holding Period Return
If you bought a security at $1,000 and after one year it is sold for $1,250  What is the holding period return of the investment?
Return on Investments and Residual income
Baird Home Maintenance Company earned operating income of $6,587,900 on operating assets of $58,300,000 during Year 2. The Tree Cutting Division earned $1,242,260 on operating assets of $6,940,000. Baird has offered the Tree Cutting Division $2,070,000 of additional operating assets. The manager of the Tree Cutting Division believes he could use the additional assets to generate operating income amounting to $432,630. Baird has a desired return on investment (ROI) of 9.30 percent.Required Calculate the return on investment for Baird, the...
Its gross profit(loss) equals
A company has sales of $7,22,200 and cost of goods sold of $2,89,200.Its gross profit (loss) equals (a) $1,011,240 (b) $2,89,200 (c) $7,22,200 (d) $4,33,000  
Various important theories of Profit in Economics.
What are the theories of Profit in Economics? Name them.  What is meant by Dynamic Theory, Risk-bearing Theory, Uncertainty Bearing Theory and Schumpeter's Innovation Theory? Illustrate these theoris one by one.
What is the return on average total assets?
The following figures are taken from Ethaniel Company's financial statements for the calendar years 200B and 200A:   200B 200A Total Assets $900,000 $750,000 Long-term debt (12% interest rate) 125,000   8% Preferred stocks, $100 par value 225,000 225,000 Total Stockholders' equity 600,000 550,000 Net Income (after tax of 30%) 70,000 550,000 What is the return on average total assets?
Calculate the return on the capital employed of the firm is
ABC company has a net profit calculated on the replacement cost is OMR 250,000 and the capital employed is OMR 3000000. The return on the capital employed of the firm is a. 10.33%  b. 12% C. 8.33% d. 9.33%
Find Internal rate of return of the investment opportunity
Royal Airline Company is considering expanding its territory. The company has the opportunity to purchase one of two different used airplanes. The first airplane is expected to cost $16,200,000; it will enable the company to increase its annual cash inflow by $5,000,000 per year. The plane is expected to have a useful life of five years and no salvage value. The second plane costs $32,400,000; it will enable the company to increase annual cash flow by $7,500,000 per year. This...
Compute ending inventory, cost of goods sold, and gross profit.
My question: Assume the company uses three inventory pools instead of one. Compute ending inventory, cost of goods sold, and gross profit. (Round price index to 2 decimal places, e.g. 1.45 and final answers to 0 decimal places, e.g. 6,548.)   William’s Televisions produces television sets in three categories: portable, midsize, and flat-screen. On January 1, 2020, William adopted dollar-value LIFO and decided to use a single inventory pool. The company’s January 1 inventory consists of: Category   Quantity  ...