Question

In: Accounting

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
Next > < Previous

Related Solutions

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...
A Corporation reported the following activity in 2010: Income from operations:                              &
A Corporation reported the following activity in 2010: Income from operations:                                           $2,000,000 Deductions from operations before Special items:                                                                (1,300,000) Dividends from 15% owned corporations           100,000 Total business meals                                                        (40,000) Total charitable contribution                                       (130,000) NOL carryover from previous year                           (35,000) Assignment - Calculate the following in good form: Corporate taxable income Corporate tax liability Charitable contribution carryover (if any)
Dividend revenue and interest revenue are reported in the income statement as a component of a...
Dividend revenue and interest revenue are reported in the income statement as a component of a company's net income True or False
2.Amortizing a discount on along−termbond investment will​cause: A.the interest revenue reported on the income statement to...
2.Amortizing a discount on along−termbond investment will​cause: A.the interest revenue reported on the income statement to equal the cash received by the investor B.the cash received by the investor to exceed the interest revenue reported on the income statement C.the interest revenue reported on the income statement to exceed the cash received by the investor D.the interest revenue reported is not related to the cash received by the investor 3.When a premium on a bond investment is amortized by the...
Income from operations is one of the most important items reported by a company. Depending on...
Income from operations is one of the most important items reported by a company. Depending on the decision-making needs of management, income from operations can be determined using absorption costing or variable costing. Choose whether the following characteristics are most often associated with absorption costing or variable costing. Absorption Costing Variable Costing Required under generally accepted accounting principles (GAAP) Often used for internal use in decision making Cost of goods manufactured includes only variable manufacturing costs Used in reports prepared...
E10-5 Calculating Return on Investment, Residual Income, Determining Effect of Changes in Sales, Expenses, Invested Assets,...
E10-5 Calculating Return on Investment, Residual Income, Determining Effect of Changes in Sales, Expenses, Invested Assets, Hurdle Rate on Each [LO 10-4, 10-5] Solano Company has sales of $780,000, cost of goods sold of $510,000, other operating expenses of $38,000, average invested assets of $2,300,000, and a hurdle rate of 12 percent. Required: 1. Determine Solano’s return on investment (ROI), investment turnover, profit margin, and residual income. (Do not round your intermediate calculations. Enter your ROI and Profit Margin percentage...
Find rate of return on your investment if P = $1000 and annual income = $71...
Find rate of return on your investment if P = $1000 and annual income = $71 for 25 years of your business.
Describe how the following types of revenue are reported on the Income Statement: a...Discounts from Charges...
Describe how the following types of revenue are reported on the Income Statement: a...Discounts from Charges b...Charity care c...Bad Debt Losses What do you think is the significance behind this reporting method?
Randolph Company reported pretax net income from continuing operations of $1,003,000 and taxable income of $710,000....
Randolph Company reported pretax net income from continuing operations of $1,003,000 and taxable income of $710,000. The book-tax difference of $293,000 was due to a $283,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $140,000 due to an increase in the reserve for bad debts, and a $150,000 favorable permanent difference from the receipt of life insurance proceeds. Randolph Company’s applicable tax rate is 34 percent. a. Compute Randolph Company’s current income tax expense. b. Compute Randolph...
Randolph Company reported pretax net income from continuing operations of $959,000 and taxable income of $590,000....
Randolph Company reported pretax net income from continuing operations of $959,000 and taxable income of $590,000. The book-tax difference of $369,000 was due to a $205,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $88,000 due to an increase in the reserve for bad debts, and a $252,000 favorable permanent difference from the receipt of life insurance proceeds. c. Compute Randolph Company’s effective tax rate. (Round your answer to 2 decimal places.) Effective tax rate % d....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT