The sales, income from operations, and invested assets for each division of Gros

Question

The sales, income from operations, and invested assets for each division of Grosbeak Company are as follows: Sales Income from Operations Invested Assets

Division E $5,000,000 $550,000 $2,400,000

Division F 4,800,000 860,000 2,500,000

Division G 7,000,000 860,000 2,900,000

(a) Using the DuPont formula, determine the profit margin, investment turnover, and rate of return on investment for each division. Round profit margin percentage to two decimal places, investment turnover to four decimal places, and rate of return on investment to one decimal place.

(b) Which division is the most profitable per dollar invested?

Explanation / Answer

Answer. A. Profit Margin X Investment Turnover = ROI (Income From Operation / Sales) (Sales / Invested Assets) Division E 11.00% X                                        2.08 = 22.92% ($550,000 / 5,000,000) (5,000,000 / 2,400,000) Division F 17.92% X                                        1.92 = 34.40% (860,000 / 4,800,000) (4,800,000 / 2,500,000) Division G 12.29% X                                        2.41 = 29.66% (860,000 / 7,000,000) (7,000,000 / 2,900,000) Answer. b. Division F is most profitable

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