Question

($ millions) Beverage Division Cheese Division Invested assets, beginning $ 2,669 $ 4,462 Invested assets, ending 2,597 4,404 Sales 2,685 3,929 Operating income 353 638 rev: 11_25_2020_QC_CS-242542 1. Compute return on investment. 2. Compute profit margin. 3. Compute investment turnover for the year

Answer 1

Beverage Division Cheese Division

1. Return on investment 12.89% 18.25%

2. Profit margin 13.15% 16.24%

3. Investment turnover 1.02 0.89

Step-by-step explanation:

a) Data and Calculations:

Beverage Division Cheese Division

Invested assets, beginning $ 2,669 $ 4,462

Invested assets, ending 2,597 4,404

Average invested assets $ 2,633 $ 4,433

Sales 2,685 3,929

Operating income 353 638

Return on investment 12.89% 18.25%

Profit margin 13.15% 16.24%

Investment turnover 1.02 0.89

Return on investment = Profit margin/Investment turnover

Beverage = 13.15%/1.02 = 12.89%

Cheese = 16.24%/0.89 = 18.25%

Profit margin = Operating income/Sales * 100

Beverage = $353/2,685 * 100 = 13.15%

Cheese = $638/3,929 * 100 = 16.24%

Investment turnover = Sales/Average invested assets

Beverage = $2,685/$2,633 = 1.02

Cheese = $3,929/$4,433 = 0.89