Chapter 11, Problem 27E

Margin, Turnover, Return on Investment, Average Operating Assets

Elway Company provided the following income statement for the last year:

At the beginning of last year, Elway had $28,300,000 in operating assets. At the end of the year, Elway had $23,700,000 in operating assets.

Required:

1. 1. Compute average operating assets.
2. 2. Compute the margin and turnover ratios for last year. (Note: Round the answer for margin ratio to two decimal places.)
3. 3. Compute ROI. (Note: Round answer to two decimal places.)
4. 4. CONCEPTUAL CONNECTION Briefly explain the meaning of ROI.
5. 5. CONCEPTUAL CONNECTION Comment on why the ROI for Elway Company is relatively high (as compared to the lower ROI of a typical manufacturing company).