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(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.
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:
Profit margin=Income from operationsSales
Investment turnover: This ratio gauges the operating efficiency by quantifying the amount of sales generated from the assets invested.
Formula of investment turnover:
Investment turnover=SalesInvested assets
Formula of ROI according to Dupont formula:
Return on investment = Profit margin × Investment turnover=Income from operationsSales×SalesInvested assets=Income from operationsInvested assets
To prepare: The income statements for C, SC, and RB Divisions of Company CG for the year ended June 30, 2016
(2)
Profit margin, investment turnover, and return on investment of C, SC, and RB 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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Chapter 24 Solutions
Custom Bundle: Accounting, Loose-leaf Version, 26th + Working Papers, Chapters 1-17, 26th Edition
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubCornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
- Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
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