Results from Prime Corporation\'s most recent year of operations are presented i

Question

Results from Prime Corporation's most recent year of operations are presented in the following table ?(Click the icon to view the information.) Requirements 1. Calculate the sales margin, capital turnover, and return on investment (ROl) 2. Calculate the residual income (RI). Data Table Requirement 1. Calculate the sales margin, capital turnover, and return on investment (ROI) $3,800 38,500 14 % First enter the formula, then calculate the sales margin Sales margin Target rate of return. Print Done Next enter the formula, then calculate the capital turnover. (Round your answer to two decimal places.) - Capital turnover imes

Explanation / Answer

SOLUTION

(A) Sales margin = Income / Sales revenue

= $9,240 / $38,500 = 24%

Capital turnover = Sales revenue / Invested capital

= $38,500 / $14,000 = 2.75 times

ROI = Income / Invested capital

= $9,240 / $14,000 = 66%

(B) Residual income = Income from operations - (Average productive assets * Interest rate )

= $9,240 - ($14,000 * 14%)

=  $9,240 - $1,960

= $7,280

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