Helton Corporation\'s balance sheet indicates that the company has $280,000 inve

Question

Helton Corporation's balance sheet indicates that the company has $280,000 invested in operating assets. During 2014 Helton earned operating income of $57,000 on $616,000 of sales Required Compute Helton's profit margin for 2014. (Round your answer to 2 decimal places. (i.e., 2345 should be entered as 23.45).) Compute Helton's turnover for 2014. (Round your answer to 2 decimal places.) Compute Helton's return on investment for 2014. (Round intermediate calculations and final answer to 2 decimal places. (i.e., .2345 should be entered as 23.45).) Recompute Helton's ROl 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).] Sales increase from $616,000 to $806,000, thereby resulting in an increase in operating income from $57,000 to $76,000. 2 Sales remain constant, but Helton reduces expenses resulting in an increase in operating income from $57,000 to $61,000. 3 Helton is able to reduce its invested capital from $280,000 to $217,000 without affecting operating income.

Explanation / Answer

a. Profit margin = Net Income / Total sales = 57000 / 616000 = 9.25%

b. Turnover = Sales / Operating Assets = 616000 / 280000 = 2.20 times

c. Return on investment = Net Income / Operating Assets = 57000 / 280000 = 20.36%

d.

1) Return on investment = Net Income / Operating Assets = 76000 / 280000 = 27.14%

2) Return on investment = Net Income / Operating Assets = 61000 / 280000 = 21.79%

3) Return on investment = Net Income / Operating Assets = 57000 / 217000 = 26.27%

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