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 $1,580,000 $1,640,000 $1,570,000 Operating expenses 768,000 689,600 1,109,200 Invested assets 5,800,000 4,800,000 3,200,000 The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations. Required: Line Item Description Fee revenue Mutual Fund Division 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations. E.F. Lynch Company Divisional Income Statements For the Year Ended June 30, 2018 Operating expenses Operating income Division Electronic Brokerage Division Mutual Fund Division Mutual Electronic Investment Fund Brokerage Banking Division Division 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 Investment Banking Division % % Electronic Brokerage Division Investment Banking Division 3. When faced with limited funds for expansion, management should consider an expansion of the Division first. % ROI % % %
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 $1,580,000 $1,640,000 $1,570,000 Operating expenses 768,000 689,600 1,109,200 Invested assets 5,800,000 4,800,000 3,200,000 The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations. Required: Line Item Description Fee revenue Mutual Fund Division 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations. E.F. Lynch Company Divisional Income Statements For the Year Ended June 30, 2018 Operating expenses Operating income Division Electronic Brokerage Division Mutual Fund Division Mutual Electronic Investment Fund Brokerage Banking Division Division 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 Investment Banking Division % % Electronic Brokerage Division Investment Banking Division 3. When faced with limited funds for expansion, management should consider an expansion of the Division first. % ROI % % %
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
$1,580,000
$1,640,000
$1,570,000
Operating expenses
768,000
689,600
1,109,200
Invested assets
5,800,000
4,800,000
3,200,000
The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of
operations.
Required:
Line Item Description
Fee revenue
Mutual Fund
Operating expenses
Operating income
Division
1. Prepare condensed divisional income statements for the three divisions, assuming that there were no support
department allocations.
E.F. Lynch Company
Divisional Income Statements
For the Year Ended June 30, 2018
Division
Electronic
Brokerage
Division
Mutual Fund Division
Mutual Electronic Investment
Fund Brokerage Banking
Division Division 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
Banking
Division
%
%
%
Investment Turnover
Electronic Brokerage Division
Investment Banking Division
3. When faced with limited funds for expansion, management should consider an expansion of the
Division first.
ROI
%
%
%
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