Question

Bottlebrush Company has income from operations of $73,745, invested assets of $245,000, and sales of $1,053,500. Use the DuPont formula to calculate the return on investment, and show (a) the profit margin, (b) the investment turnover, and (c) the return on investment. Round answers to one decimal place. a. Profit Margin fill in the blank 1 % b. Investment Turnover fill in the blank 2 c. Return on Investment

Answer 1

a. Profit margin = Income from operations / Sales

Profit margin = $73,745/$1,053,500

Profit margin = 0.07

Profit margin = 7%

b. Investment turnover = Sales/Invested assets

Investment turnover = $1,053,500/$245,000

Investment turnover = 4.3 times

c. Rate of return on investment = Profit margin * Investment turnover

Rate of return on investment = 7% * 4.3

Rate of return on investment = 30.10%