In: Accounting
Calculating Average Operating Assets, Margin, Turnover, Return on Investment (ROI)
Forchen, Inc., provided the following information for two of its divisions for last year:
Small Appliances Division |
Cleaning Products Division |
|
Sales | $34,670,000 | $34,800,000 |
Operating income | 2,773,600 | 1,392,000 |
Operating assets, January 1 | 6,394,000 | 5,600,000 |
Operating assets, December 31 | 7,474,000 | 6,000,000 |
Required:
1. For the Small Appliances Division, calculate:
a. Average operating assets | $ | |
b. Margin | % | |
c. Turnover | ||
d. Return on investment (ROI) | % |
2. For the Cleaning Products Division, calculate:
a. Average operating assets | $ | |
b. Margin | % | |
c. Turnover | ||
d. Return on investment (ROI) | % |
3. What if operating income for the Small Appliances Division was $2,080,200? How would that affect average operating assets? Margin? Turnover? ROI? Calculate any changed ratios. When required, round the percent to four decimal places before converting to a percentage. For example, .88349 would be rounded to .8835 and entered as 88.35. Enter "0", where ever required.
Average operating assets | Unaffected | by %__ |
Margin | Lower | by %__ |
Turnover | Unaffected | by %__ |
Return on investment (ROI) | Lower | by %__ |
Revised | ||||||||
Small Appliances | Cleaning Products | Small Appliances | ||||||
Division | Division | Division | ||||||
Sales | 34,670,000 | 34,800,000 | 34,670,000 | |||||
Operating income | 2,773,600 | 1,392,000 | 2,080,200 | |||||
Operating assets, January 1 | 6,394,000 | 5,600,000 | 6,394,000 | |||||
Operating assets, December 31 | 7,474,000 | 6,000,000 | 7,474,000 | |||||
Answer | Formula Used | Equation | ||||||
1 | Average Opertaing Assets | 6,934,000 | (Opening Assets+Closing)/2 | (6394000+7474000)/2 | ||||
Margin | 8.00% | (Operating Income/Sales) | (2773600/34670000) | |||||
Turnover | 34,670,000 | Sales | ||||||
ROI | 40.00% | (Operating Income/Av Operating Assets) | (2773600/6934000) | |||||
Answer | Formula Used | Equation | ||||||
2 | Average Opertaing Assets | 5,800,000 | (Opening Assets+Closing)/2 | (5600000+6000000)/2 | ||||
Margin | 4.00% | (Operating Income/Sales) | (1392000/34800000) | |||||
Turnover | 34,800,000 | Sales | ||||||
ROI | 24.00% | (Operating Income/Av Operating Assets) | (1392000/5800000) | |||||
Answer | Formula Used | Equation | ||||||
3 | Average Opertaing Assets | 6,934,000 | (Opening Assets+Closing)/2 | (6394000+7474000)/2 | ||||
Margin | 6.00% | (Operating Income/Sales) | (2080200/34670000) | |||||
Turnover | 34,670,000 | Sales | ||||||
ROI | 30.00% | (Operating Income/Av Operating Assets) | (2080200/6934000) | |||||
Average operating assets |
Unaffected | by 0% | ||||||
Margin | Lower | by 2% | ||||||
Turnover | Unaffected | by 0% | ||||||
Return on investment (ROI) | Lower | by 10% | ||||||