The following data pertain to British Isles Aggregates Company, a producer of sa
ID: 2455953 • Letter: T
Question
The following data pertain to British Isles Aggregates Company, a producer of sand, gravel, and cement, for the year just ended.
£ denotes the British pound sterling, the national monetary unit of the United Kingdom. Although the euro is used in most European markets, the U.K. continues to use pounds sterling for its national currency.
1. If the sales and average invested capital remain the same during the next year, to what level would total expenses have to be reduced in order to improve the firm’s ROI to 10 percent?
Assuming that the expenses and cost of goods sold are reduced in order to improve the firm's ROI to 10 percent, compute the firm's new sales margin. (Round your "Percentage" answer to 2 decimal places. (i.e., .1234 should be entered as 12.34))
Show how the new sales margin and the old capital turnover together result in a new ROI of 10 percent. (Round your "Percentage" answer to 2 decimal places. (i.e., .1234 should be entered as 12.34))
The following data pertain to British Isles Aggregates Company, a producer of sand, gravel, and cement, for the year just ended.
Explanation / Answer
British Isles Aggregate Company Details. £ Sales revenue 6,050,000 Cost of goods sold 2,947,000 Operating expenses 2,921,500 Total Expenses 5,868,500 Net Income 181,500 Average invested capital 3,025,000 Sales Margin 3.00% Asset Turnover ratio 2 ROI = Sales margin *Asset TO 6.00% Required ROI 10% Required net income 302,500 Current Net Income 181,500 3.a. So Total expenses to be reduced to get revised net income = £ 121,000 Revised Details for ROI Details £ Sales revenue 6,050,000 Total Expenses 5,747,500 Net Income 302,500 3.b. New Sales Margin 5.00% Average invested capital 3,025,000 Asset TO ratio unchanged 2 New ROI=5%*2= 10.0%
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