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Rate of Return on Investment Commodore Entertainment recently reported sector income from operations, revenue, and invested...

Rate of Return on Investment

Commodore Entertainment recently reported sector income from operations, revenue, and invested assets as follows:

  • Media Networks: The ABC television and radio network, Commodore channel, ESPN, A&E, E!, and Commodore.com
  • Parks and Resorts: Commodore World Resort, Commodoreland, Commodore Cruise Line, and other resort properties
  • Studio Entertainment: Commodore Entertainment, which releases films by Pixar Animation Studios, Marvel Studios, Commodore/Lucasfilm, and Touchstone Pictures
  • Consumer Products: Character merchandising, Commodore stores, books, and magazines

Commodore recently reported sector income from operations, revenue, and invested assets (in millions) as follows:

    Income from
    Operations		     
Revenue		     Invested
    Assets
Media Networks $139,776 $499,200 $832,000
Parks and Resorts 54,825 451,500 645,000
Studio Entertainment 13,048 372,800 466,000
Consumer Products 67,353 282,600 157,000

a. Use the DuPont formula to determine the rate of return on investment for the four Commodore Entertainment sectors. Round Profit Margin, ROI to one decimal place and Investment Turnover to two decimal places.

Profit Margin Investment Turnover ROI
Media Networks % %
Parks and Resorts % %
Studio Entertainment % %
Consumer Products %

%

b. How do the four sectors differ in their profit margin, investment turnover, and return on investment?

__(___ has the highest profit margin, while _____ has the lowest profit margin. ______ has the highest return on investment, while_____ has the lowest return on investment.

Solutions

Expert Solution

Profit Margin = Income from Operations/Revenue
Investment Turnover = Revenue/ Invested Assets
ROI = Profit Margin X Investment Turnover
a
Profit Margin Investment Turnover ROI
Media Networks 28.0% 0.60 16.8%
Parks and Resorts 12.1% 0.70 8.5%
Studio Entertainment 3.5% 0.80 2.8%
Consumer Products 23.8% 1.80 42.8% or 42.9%
b
Media Networks has the highest profit margin, while Studio Entertainment has the lowest profit margin. Consumer Products has the highest return on investment, while Studio Entertainment has the lowest return on investment.
Workings:
Profit Margin Investment Turnover ROI
Media Networks =139776/499200 =499200/832000 =28%*0.6
Parks and Resorts =54825/451500 =451500/645000 =12.1%*0.7
Studio Entertainment =13048/372800 =372800/466000 =3.5%*0.8
Consumer Products =67353/282600 =282600/157000 =23.8%*1.8

ekkarill92 answered 2 years ago
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