Question 3A Company A provided the following information for last year: Operatin

Question

Question 3A
Company A provided the following information for last year:

Operating income $64,000
Sales $200,000

Beginning operating assets $387,000
Ending operating assets $413,000

Company A's margin for last year was

a 2.0.

b 0.16.

c 0.32.

d 0.5.

e 0.1.




Question 3B
Company A provided the following information for last year:

Operating income $64,000
Sales $200,000
Beginning operating assets $387,000
Ending operating assets $413,000

Company A's turnover ratio for last year was

a 2.0.

b 0.16.

c 0.32.

d 0.5.

e 0.1.




Question 3C
Company A provided the following information for last year:

Operating income $64,000
Sales $200,000
Beginning operating assets $387,000
Ending operating assets $413,000

Company A's return on investment for last year was

a 2.0.

b 0.16.

c 0.32.

d 0.5.

e 0.1.

Explanation / Answer

1) The formula for calculating the Net operating margin is Net operating margin = Operating income / Net sales = $64,000 / $200,000 = 0.32 The correct option is c) 0.32 2) Formula for calculating the asset turnover ratio: Total Asset turnover ratio = Net sales / Average total assets Average total assets = (Beginning operating assets + Ending Operating assets) /2 = ($387,000 + $413,000) / 2 = $400,000 Total Asset turnover ratio = $200,000 / $400,000 = 0.5 The correct option is d) 0.5 3) The DU-pont formula for ROI is ROI = Net profit margin * Total assets turnover = 0.32 * 0.5 (Taking the values from above) = 0.16 Therefore, the correct option is b) 0.16

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