Campbell Corporation’s balance sheet indicates that the company has $540,000 inv

Question

Campbell Corporation’s balance sheet indicates that the company has $540,000 invested in operating assets. During 2018, Campbell earned operating income of $58,320 on $1,080,000 of sales. *********Please explain in detail*********

Required

a.    Compute Campbell’s profit margin for 2018.

b.    Compute Campbell’s turnover for 2018.

c.     Compute Campbell’s return on investment for 2018.

d.    Recompute Campbell’s ROI under each of the following independent assumptions:
(1) Sales increase from $1,080,000 to $1,296,000, thereby resulting in an increase in operating income from $58,320 to $64,800.
(2) Sales remain constant, but Campbell reduces expenses, resulting in an increase in operating income from $58,320 to $60,480.
(3) Campbell is able to reduce its invested capital from $540,000 to $432,000 without affecting operating income.

Requirement A& C

Compute Campbell’s profit margin, turnover and return on investment for 2018. (Round "Profit margin" and "Return on investment" to 1 decimal place.)

Profit margin

%

Turnover

times

Return on investment

%

Requirement D

Recompute Campbell’s ROI under each of the following independent assumptions: (Do not round intermediate calculations. Round your answers to 2 decimal places. (i.e., .2345 should be entered as 23.45).)

(1) Sales increase from $1,080,000 to $1,296,000, thereby resulting in an increase in operating income from $58,320 to $64,800.

(2) Sales remain constant, but Campbell reduces expenses, resulting in an increase in operating income from $58,320 to $60,480.

(3) Campbell is able to reduce its invested capital from $540,000 to $432,000 without affecting operating income.

Return on Investment

(1)

%

(2)

%

(3)

%

Profit margin

%

Turnover

times

Return on investment

%

Explanation / Answer

a)Profit marginfor 2018 = (Operating income/Sales*100) = $58320/1080000= 5.4% b)Turnover for 2018 = Sales/Operating assets = $1080000/540000=2times C) ROI for 2018 = 5.4%*2 = 10.8% d.1) ROI = $64800/$540000=12% d.2) ROI = $60480/$540000=11.2% d.3) ROI = $58320/$432000=13.5% Note: Please marked rating, if solution is as per your expectation

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