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 operations Sales 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 = Sales Invested assets 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. Formula of ROI according to Dupont formula: Return on investment = Profit margin × Investment turnover = Income from operations Sales × Sales Invested assets = Income from operations Invested assets To compute: Profit margin, investment turnover, and return on investment (ROI), and draft a memo to the president explaining the performance of N Division

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Chapter 24, Problem 24.3CP

To determine

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

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.

Formula of ROI according to Dupont formula:

Return on investment = Profit margin × Investment turnover=Income from operationsSales×SalesInvested assets=Income from operationsInvested assets

To compute: Profit margin, investment turnover, and return on investment (ROI), and draft a memo to the president explaining the performance of N Division

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