MEWORK Saved Problem 15-22 Return on investment LO 15-6 Walton Corporation\'s ba
ID: 2590157 • Letter: M
Question
MEWORK Saved Problem 15-22 Return on investment LO 15-6 Walton Corporation's balance sheet indicates that the company has $680,000 invested in operating assets. During 2018, Walton earned operating income of $92,480 on $1,360,000 of sales. Required a. Compute Walton's profit margin for 2018 b. Compute Walton's turnover for 2018. c Compute Walton's return on investment for 2018. d. Recompute Walton's ROI under each of the following independent assumptions: (1) Sales increase from $1,360,000 to $1,632,000, thereby resulting in an increase in operating income from $92,480 to $97,920. (2) Sales remain constant, but Walton reduces expenses, resulting in an increase in operating income from $92,480 to $95,200. (3) Walton is able to reduce its invested capital from $680,000 to $544,000 without affecting operating income. Complete this question by entering your answers in the tabs below. Req A to CReg D Compute Walton's profit margin, turnover and return on investment for 2018. (Round "Profit margin" and "Return on investment' to 1 decimal place.) a. Profit margin b. Tumover a. times Req DExplanation / Answer
Answer:
Profit margin , Turnover times and return on investment
Profit Margin
6.80%
Turnover ratio
2.00
Return on investment
13.60%
Working notes for the answer:
a)
Calculation of profit margin
Operating assets (a)
680,000
Operating Income (b)
92,480
Sales (c)
1,360,000
Profit Margin (b/c)
6.80%
b)
calculation of turnover
Sales (a)
1,360,000
Operating assets (b)
680,000
Turnover ratio a/b
2.00
c)
calculation of Return on investment
Sales (a)
1,360,000
Operating Income (b)
92,480
Margin ratio b/a
6.80%
Sales (a)
1,360,000
Operating assets (b)
680,000
Turnover ratio a/b
2
ROI = Margin* Turnover
13.60%
__________________________________________________________
d)
1
2
3
sales (a)
1,632,000
1,360,000
1,360,000
Operating Income (b)
97,920
95,200
92,480
Operating assets (c )
680,000
680,000
544,000
ROI (b/c)
14.40%
14.00%
17.00%
situation
ROI
1
14.40%
2
14.00%
3
17.00%
Profit Margin
6.80%
Turnover ratio
2.00
Return on investment
13.60%
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