Exercise 22-11 Kraft foods group reports the following for two of its divisions

Question

Exercise 22-11

Kraft foods group reports the following for two of its divisions for a recent year. All numbers are in millions of dollars.

Cheese Division

$4,455

$4,400

$3,925

$634

For each division, compute 1) return on investment, 2) profit margin, and 3) investment turnover for the year. Round answers to two decimal places

Millions ($) Beverage Division

Cheese Division

Invested assets, beginning $2,662

$4,455

Invested assets, ending $2,593

$4,400

Sales $2,681

$3,925

Operating Income $349

$634

Explanation / Answer

Beverage Division : Average assets 2627.5 =(2662+2593)/2 Return on investment 13.28% =349/2627.5 Profit margin 13.02% =349/2681 Investment turnover 1.02 =2681/2627.5 Cheese Division : Average assets 4427.5 =(4455+4400)/2 Return on investment 14.32% =634/4427.5 Profit margin 16.15% =634/3925 Investment turnover 0.89 =3925/4427.5

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