Kraft Foods Group reports the following for two of its divisions for a recent ye

Question

Kraft Foods Group reports the following for two of its divisions for a recent year. All numbers are in millions of dollars Cheese Division $4,455 4,400 3,925 634 Beverage (Smillions) Invested assets, beginning Invested assets, ending Sales Operating income Division $ 2,662 2,593 2,681 349 1. Compute return on investment. (Enter your answer in millions of dollar.) Return on Investment Choose Numerator: Choose Denominator: Return on Investment Investment Center Beverage Cheese Return on investment 2. Compute profit margin. (Enter your answer in millions of dollar.) Profit Margin Profit Margin Profit margin Choose Numerator: Choose Denominator: Investment Center Beverage Cheese 3. Compute investment turnover for the year. (Enter your answer in millions of dollar.) Investment Turnover Choose Numerator: Choose Denominator: Investment Turnover Investment Center Beverage Cheese Investment turnover

Explanation / Answer

ROI = Operating Income / Average Invested Assets

Profit Margin = Operating Income / Sales

Investment Turnover = Sales / Average Invested Assets

Average Invested Assets = (Beginning Invested Assets + Ending Invested Assets) / 2

For Beverage Division = ($2,662 + $2,593) / 2 = $2,627.50

For Cheese Division = ($4,455 + $4,400) / 2 = $4,427.50

Answer 1 Return on Investment

Answer 2 Profit Margin

Answer 3 Investment Turnover

Choose Numerator / Choose Denominator = Return on Investment Invetment Center Operating Income / Average Invested Assets = Return on Investment Beverage 349 / 2,627.50 = 0.1328 or 13.28 % Cheese 634 / 4,427.50 = 0.1432 or 14.32 %

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