Profit Margin, Investment Turnover, and return on investment The condensed income statement for the Consumer Products Division of Fargo Industries Inc. is as follows (assuming no service department charges): Sales $1,026,000 Cost of goods sold 461,700 Gross profit $564,300 Administrative expenses 205,200 Income from operations $359,100 The manager of the Consumer Products Division is considering ways to increase the return on investment. a.  Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $1,710,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place. Profit margin  % Investment turnover   Rate of return on investment  % b.  If expenses could be reduced by $51,300 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division? Round the investment turnover to one decimal place. Profit margin  % Investment turnover   Rate of return on investment  %

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
icon
Concept explainers
Question
Practice Pack
  1. Profit Margin, Investment Turnover, and return on investment

    The condensed income statement for the Consumer Products Division of Fargo Industries Inc. is as follows (assuming no service department charges):

    Sales $1,026,000
    Cost of goods sold 461,700
    Gross profit $564,300
    Administrative expenses 205,200
    Income from operations $359,100

    The manager of the Consumer Products Division is considering ways to increase the return on investment.

    a.  Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that $1,710,000 of assets have been invested in the Consumer Products Division. Round the investment turnover to one decimal place.

    Profit margin  %
    Investment turnover  
    Rate of return on investment  %

    b.  If expenses could be reduced by $51,300 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division? Round the investment turnover to one decimal place.

    Profit margin  %
    Investment turnover  
    Rate of return on investment  %
 
Expert Solution
trending now

Trending now

This is a popular solution!

video

Learn your way

Includes step-by-step video

steps

Step by step

Solved in 2 steps with 4 images

Blurred answer
Knowledge Booster
Cost volume profit (CVP) analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education