In: Accounting
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.
Required
Compute Munoz’s profit margin for Year 2.
Compute Munoz’s turnover for Year 2.
Compute Munoz’s return on investment for Year 2.
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= 1,200,000 / 600,000
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%