36. Morgan Company has a RO of 5% and a capital turnover of 8%. what is its retu

Question

36. Morgan Company has a RO of 5% and a capital turnover of 8%. what is its return on , sales? A. 133% B. 75%. C. 62.5%. D. Some other percentage 37. Calculate the residual income assuming the following information: $375,000 12% S1.300,000 Operating earnings Minimum acceptable return Invested capital A.$156,000. 8. $108,000. C. $219,00o. D. $45,000 38. The Parry company provided the following information regarding its operations: 2011 Total assets $5,000,000 2012 Total assets $5,500,000 2011 Net operating income $875,000 2012 Net operating income $92,500 2011 Net sales $2,525,000 2012 Net sales $3,100,000 What is Parry's ROl for the year ending 2012? A. 1.50%. B. 2.72%. C. 1.76%. D. 1.82% .

Explanation / Answer

36 A Return on investment               0.05 {5%} B Return/Investment               0.05 C Capital turnover 0.08 {8%} D Sales/Investment 0.08 E=B/D Return/Sales(0.05/0.08)          0.6250 Return on Sales 62.50% ANSWER: C.62.5% 37 A Operating earnings $375,000 B Invested Capital $1,300,000 C Minimum acceptable return 12% D=B*C Minimum acceptable return in dollars $156,000 E=A-D Residual Income $219,000 ANSWER: C.$219,000 38 A Net Operating Income in 2012 $92,500 B Total assets in end of 2012 $5,500,000 C Total assets in end of 2011 $5,000,000 D=(B+C)/2 Average asset during the year 2012 5250000 E=A/D ROI for the year ending 2012          0.0176 ROI for the year ending 2012 1.76% ANSWER:C.1.76%

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