Divisional Income Statements and Return on Investment Analysis E.F. Lynch Company is a diversified investment company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y8, are as follows: Electronic Brokerage Division $1,990,000 $2,090,000 968,000 882,200 7,300,000 6,100,000 The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations. Fee revenue Operating expenses Invested assets Fee revenue Mutual Fund Operating expenses Income from operations Division 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department cost allocations. Division E.F. Lynch Company Divisional Income Statements For the Year Ended June 30, 20Y8 Mutual Electronic Fund Division Brokerage Division Investment Banking Division 2. Using the DuPont formula for return on investment, compute the profit margin, investment turnover, and return on investment for each division. Round your answers to one decimal place. Investment Turnover Profit Margin Investment Banking Division $2,020,000 1,429,600 4,100,000 % % Mutual Fund Division Electronic Brokerage Division Investment Banking Division 3. When faced with limited funds for expansion, management should consider an expansion of the Division first. %
Divisional Income Statements and Return on Investment Analysis E.F. Lynch Company is a diversified investment company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y8, are as follows: Electronic Brokerage Division $1,990,000 $2,090,000 968,000 882,200 7,300,000 6,100,000 The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations. Fee revenue Operating expenses Invested assets Fee revenue Mutual Fund Operating expenses Income from operations Division 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department cost allocations. Division E.F. Lynch Company Divisional Income Statements For the Year Ended June 30, 20Y8 Mutual Electronic Fund Division Brokerage Division Investment Banking Division 2. Using the DuPont formula for return on investment, compute the profit margin, investment turnover, and return on investment for each division. Round your answers to one decimal place. Investment Turnover Profit Margin Investment Banking Division $2,020,000 1,429,600 4,100,000 % % Mutual Fund Division Electronic Brokerage Division Investment Banking Division 3. When faced with limited funds for expansion, management should consider an expansion of the Division first. %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Divisional Income Statements and Return on Investment Analysis
E.F. Lynch Company is a diversified investment company with three operating divisions organized as
investment centers. Condensed data taken from the records of the three divisions for the year ended June 30,
20Y8, are as follows:
Fee revenue
Operating expenses
Invested assets
Fee revenue
Mutual Fund
Division
$1,990,000
$2,090,000
968,000
882,200
7,300,000
6,100,000
The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion
of operations.
Operating expenses
Income from operations
Division
Electronic
Brokerage
Division
1. Prepare condensed divisional income statements for the three divisions, assuming that there were no
service department cost allocations.
E.F. Lynch Company
Divisional Income Statements
For the Year Ended June 30, 20Y8
Mutual Electronic
Fund Brokerage
Division
Division
Investment
Banking
Division
Investment
Banking
Division
2. Using the DuPont formula for return on investment, compute the profit margin, investment turnover, and
return on investment for each division. Round your answers to one decimal place.
Profit Margin
Investment Turnover
%
$2,020,000
1,429,600
4,100,000
Mutual Fund Division
Electronic Brokerage Division
Investment Banking Division
3. When faced with limited funds for expansion, management should consider an expansion of the
Division first.
%
%
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