
a)
Calculate profit margin of Corporation H for 2014.
a)

Explanation of Solution
Operating profit margin: It is one of the profitability ratios. Operating profit margin ratio is used to measure the percentage of operating income that is being generated per dollar of revenue or sales.
Calculate profit margin of Corporation H for 2014.
Thus, the profit margin of Corporation H for 2014 is 5%.
b)
Calculate turnover of Corporation H for 2014.
b)

Explanation of Solution
Turnover: Turnover is a ratio that measures the amount of sales generated from each dollar of operating assets. Thus, it shows the relationship between the net sales and the operating assets. The formula to calculate turnover is as follows:
Calculate turnover of Corporation H for 2014.
Thus, the turnover of Corporation H for 2014 is 2.0 times.
c)
Calculate
c)

Explanation of Solution
Return on investment (ROI): This financial ratio evaluates how efficiently the assets are used in earning income from operations. So, ROI is a tool used to measure and compare the performance of a units or divisions or a companies.
Calculate return on investment of Corporation H for 2014:
Thus, the ROI of Corporation H for 2014 is 10.00%.
d) 1.
Calculate return on investment of Corporation H when the sales increased from $1,000,000 to $1,200,000, resulting in an increase in operating income from $50,000 to $56,000.
d) 1.

Explanation of Solution
Return on investment (ROI): This financial ratio evaluates how efficiently the assets are used in earning income from operations. So, ROI is a tool used to measure and compare the performance of a units or divisions or a companies. It is calculated by the given formula:
Calculate return on investment of Corporation H:
Thus, the ROI of Corporation H for 2014 is 11.20%.
d) 2.
Calculate return on investment of Corporation H when sales remain constant, but Corporation H reduces expenses, resulting in an increase in operating income from $50,000 to $52,000.
d) 2.

Explanation of Solution
Return on investment (ROI): This financial ratio evaluates how efficiently the assets are used in earning income from operations. So, ROI is a tool used to measure and compare the performance of a units or divisions or a companies. It is calculated by the given formula:
Calculate return on investment of Corporation H:
Thus, the ROI of Corporation H for 2014 is 10.40%.
d) 3.
Calculate return on investment of Corporation H when Corporation H is able to reduce its invested capital from $500,000 to $400,000 without affecting operating income.
d) 3.

Explanation of Solution
Return on investment (ROI): This financial ratio evaluates how efficiently the assets are used in earning income from operations. So, ROI is a tool used to measure and compare the performance of a units or divisions or a companies. It is calculated by the given formula:
Calculate return on investment of Corporation H:
Thus, the ROI of Corporation H for 2014 is 12.50%.
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Chapter 15 Solutions
SURVEY OF ACCOUNTING-ACCESS
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