Question

Below is taken from Ametek’s reportable segment financial information note to their 2017 Form 10-K:

In thousands                                                                     2017                                        2016

Net Sales:

    Electronic Instruments                                            $2,690,554                             

    Electromechanical                                                   1,609,616                             

Operating Income:

    Electronic Instruments                                                677,489                                     

    Electromechanical                                                      310,875                                   

Operating Assets:

    Electronic Instruments                                            4,803,575                                 4,104,972

    Electromechanical                                                  2,535,503                                 2,446,180

Calculate for 2017 (Please show your work):

                                                            ROI                             Margin                        Turnover

Electronic Instruments                 ____________               ___________                 ___________

Electromechanical                       ____________               ___________                 ___________

Compare the relative profitability of Ametek’s Electronic Instruments and Electromechanical segments.

Answer 1

Electronic Instruments:

Average Operating Assets = (Operating Assets, 2017 + Operating Assets, 2016) / 2
Average Operating Assets = ($4,803,575 + $4,104,972) / 2
Average Operating Assets = $4,454,273.50

Return on Investment = Operating Income / Average Operating Assets
Return on Investment = $677,489 / $4,454,273.50
Return on Investment = 15.21%

Margin = Operating Income / Net Sales
Margin = $677,489 / $2,690,554
Margin = 25.18%

Turnover = Net Sales / Average Operating Assets
Turnover = $2,690,554 / $4,454,273.50
Turnover = 0.60

Electromechanical:

Average Operating Assets = (Operating Assets, 2017 + Operating Assets, 2016) / 2
Average Operating Assets = ($2,535,503 + $2,446,180) / 2
Average Operating Assets = $2,490,841.50

Return on Investment = Operating Income / Average Operating Assets
Return on Investment = $310,875 / $2,490,841.50
Return on Investment = 12.48%

Margin = Operating Income / Net Sales
Margin = $310,875 / $1,609,616
Margin = 19.31%

Turnover = Net Sales / Average Operating Assets
Turnover = $1,609,616 / $2,490,841.50
Turnover = 0.65

Margin of electronic instruments is higher than that of electromechanical. Turnover of electromechanical is higher than that of electronic instruments. But overall return on investment of electronic instruments is higher than that of electromechanical