(1)
Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.
To prepare: The income statements for MF, EB, and IB Divisions of Company L for the year ended June 30, 2016
(2)
Profit margin: This ratio gauges the operating profitability by quantifying the amount of income earned from business operations from the sales generated.
Formula of profit margin:
Investment turnover: This ratio gauges the operating efficiency by quantifying the amount of sales generated from the assets invested.
Formula of investment turnover:
Formula of ROI according to Dupont formula:
To determine: Profit margin, investment turnover, and return on investment of MF, EB, and IB Divisions
(3)
To recommend: The expansion of the profitable division, based on income from operations and ROI, computed in parts (1) and (2).
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