Question

Gabbe Industries is a division of a major corporation. Last year the division had total sales of $24,040,500, net operating income of $3,726,278, and average operating assets of $7,755,000. The company's minimum required rate of return is 18%. Required: a. What is the division's margin? (Round your percentage answer to 2 decimal places.) b. What is the division's turnover? (Round your answer to 2 decimal places.) c. What is the division's return on investment (ROI)? (Round percentage your answer to 2 de

Answer 1

See

Step-by-step explanation:

Part A

Division's margin = Net operating income/Total sales

= $3,726,278/$24,040,500

= 0.155

Division's margin = 15.5%

Part B

Division's turnover = Total sales/Average operating assets

= $24,040,500/$7,755,000

= 3.1

Division's turnover = 3.1 times

Part C

The division's return on investment

= Net operating income/Average operating assets

= $3,726,278/$7,755,000

= 0.481

The division's return on investment is 48.1%