Question

Comparative data on three companies in the same service industry are given below.

Required:

2. Fill in the missing information. (Round the "Turnover" and "ROI" answers to 2 decimal places.)

	Company A B C Sales $3,232,000 $1,869,000 Net operating income $387,840 $280,350 Average operating assets $2,020,000 $3,010,000 Margin % % 4 % Turnover 2.40 Return on investment (ROI) % 10.50 % %

Answer 1

	Company
	A		B		C
Sales	$3,232,000		$1,869,000		$7,224,000
Net operating income	$387,840		$280,350		$288,960
Average operating assets	$2,020,000		S2,670,000		$3,010,000
Margin	12	%	15	%	4	%
Turnover	1.6 Times		0.7 Times		2.40 Times
Return on investment (ROI)	19.2	%	10.50	%	9.6 %	%

A Company

Margin = Net operating income/ Sales = $387,840 / $3,232,000 = 12%
Turnover = Sales/ Average operating assets = $3,232,000 / $2,020,000 = 1.6 Times
Return on investment (ROI) = Net operating income / Average operating assets
                                               = $387,840 / $2,020,000 = 19.2%

B Company

Average operating assets = Net operating income / Return on investment (ROI)
                                          = $280,350 / 10.50% = S2,670,000
Margin = Net operating income / Sales = $280,350 / $1,869,000 = 15%
Turnover = Sales / Average operating assets = $1,869,000/ S2,670,000 = 0.7 Times

C Company

Sales = Turnover x Average operating assets = 2.40 x $3,010,000 = $7,224,000
Net operating income = Sales x Margin = $7,224,000 x 4% = $288,960
Return on investment (ROI) = Margin x Turnover = 4% x 2.40 = 9.6 %