Franklin Corporation’s balance sheet indicates that the company has $570,000 inv

Question

Franklin Corporation’s balance sheet indicates that the company has $570,000 invested in operating assets. During 2018, Franklin earned operating income of $64,980 on $1,140,000 of sales.

A.Compute Franklin’s profit margin for 2018.

B.Compute Franklin’s turnover for 2018.

C. Compute Franklin’s return on investment for 2018.

D.

Recompute Franklin’s ROI under each of the following independent assumptions:
(1) Sales increase from $1,140,000 to $1,368,000, thereby resulting in an increase in operating income from $64,980 to $82,080.
(2) Sales remain constant, but Franklin reduces expenses, resulting in an increase in operating income from $64,980 to $67,260.
(3) Franklin is able to reduce its invested capital from $570,000 to $456,000 without affecting operating income.

Explanation / Answer

Answer =1 (A) Profit Margin = Net income / Net Sales Profit Margin = Net Income = $               64,980.00 Divide By "/" Net Sales = $         11,40,000.00 Profit Margin =                          0.0570 OR Profit Margin = 5.70% Answer =1 (B) Turover = Total Sales / Amount invested Turover = $ 1,140,000 / $ 570,000 Turover = 2 Times Answer =1 (C) Return on Investment = Operating income / Amount invested Operating Income = $               64,980.00 Divide By "/" Amount invested = $            5,70,000.00 Return on investment =                          0.1140 OR Return on investment = 11.40% Answer = 2 (1) = Return on Investment = Operating income / Amount invested Operating Income = $               82,080.00 Divide By "/" Amount invested = $            5,70,000.00 Return on investment =                          0.1440 OR Return on investment = 14.40% Answer = 2 (2) = Return on Investment = Operating income / Amount invested Operating Income = $               67,260.00 Divide By "/" Amount invested = $            5,70,000.00 Return on investment =                          0.1180 OR Return on investment = 11.80% Answer = 2 (3) = Return on Investment = Operating income / Amount invested Operating Income = $               64,980.00 Divide By "/" Amount invested = $            4,56,000.00 Return on investment =                          0.1425 OR Return on investment = 14.25%

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