Chapter 24, Problem P24.34BPGB

To determine

Profit Margin ratio:

The Profit margin ratio is a ratio of net income earned over the sales of the period. The profit margin ratio of the company represents the efficiency of the company to earn profits out of the given sales.

Assets Turnover ratio:

The Assets turnover ratio is a ratio which determines how many times the assets have been converted in to sales. The more number of times the assets are converted in to sales, the more efficient is the ratio.

Return on Investment:

The Return on Investment is a ratio signifies the ratio of net income earned over the average assets employed in the business. The ratio can also be computed through extended formula of profit margin ratio multiplied with the Assets turnover ratio.

Residual Income:

The Residual Income of the project is the excess earnings made by the project over and above the target income fixed for the project. The target income for the project is based on assets employed and target rate of return for the project. When the actual income earned is more than target income, there is a positive residual income.

Requirement1:

The ROI of the firm to be computed.

To determine

Requirement2:

TheProfit margin ratio of the Sure Firm Inc.

To determine

Requirement3:

The Assets turnover ratio for the firm shall be determined.

To determine

Requirement4:

The ROI of the firm to be computed.

To determine

Requirement5:

The Residual income of the firm to be computed.