Return on Investment, Margin, Turnover Data follow for the Construction Division

Question

Return on Investment, Margin, Turnover

Data follow for the Construction Division of D. Jack Inc.:

If required, round your answers to two decimal places.

Required:

1. Compute the margin (as a percent) and turnover ratios for each year.

2. Compute the ROI (as a percent) for the Construction Division for each year. While calculating ROI use the rounded values that are obtained from part 1.

Year 1 Year 2 Sales $178,200,000 $154,137,500 Operating income 8,910,000 9,329,375 Average operating assets 388,125,000 486,750,000

Explanation / Answer

1) Year 1 Year 2 Margin 5.00% 6.05% (8910000/178200000) (9329375/154137500) Turnover 45.91% 31.67% (178200000/388125000) (154137500/486750000) 2) ROI year 1 10.89% (5%/45.91%) ROI year 2 19.10% (6.05%/31.67%) Margin = Operating income / Sales Turnover = Sales / Average operating assets ROI = Margin/Turnover

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