ZNet Co. is a web-based retail company. The company reports the following for the past year. The company’s CEO believes that sales for next year will increase by 20% and both profit margin (%) and the level of average invested assets will be the same as for the past year. 1. Compute return on investment for the past year. 2. Compute profit margin for the past year. 3. If the CEO’s forecast is correct, what will return on investment equal for next year? 4. If the CEO’s forecast is correct, what will investment turnover equal for next year? Sales . $5,000,000 Operating income . $1,000,000 Average invested assets . $12,500,000
ZNet Co. is a web-based retail company. The company reports the following for the past year. The company’s CEO believes that sales for next year will increase by 20% and both profit margin (%) and the level of average invested assets will be the same as for the past year. 1. Compute return on investment for the past year. 2. Compute profit margin for the past year. 3. If the CEO’s forecast is correct, what will return on investment equal for next year? 4. If the CEO’s forecast is correct, what will investment turnover equal for next year? Sales . $5,000,000 Operating income . $1,000,000 Average invested assets . $12,500,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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ZNet Co. is a web-based retail company. The company reports the following for the past year.
The company’s CEO believes that sales for next year will increase by 20% and both profit margin (%) and
the level of average invested assets will be the same as for the past year.
1. Compute return on investment for the past year.
2. Compute profit margin for the past year.
3. If the CEO’s
4. If the CEO’s forecast is correct, what will investment turnover equal for next year?
Sales . $5,000,000 Operating income . $1,000,000 Average invested assets . $12,500,000
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Step 1 Introduction
VIEWStep 2 Statement showing the operating income of both year
VIEWStep 3 1. Computation of Return on investment of past year
VIEWStep 4 1. Answer
VIEWStep 5 2. Computation of profit margin of past year
VIEWStep 6 2. Answer
VIEWStep 7 3. Computation of Return on investment of next year
VIEWStep 8 3. Answer
VIEWStep 9 4. Computation of Investment Turnover
VIEWStep 10 Answer
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