Question

Cash Company has income from operations of $48,000, invested assets of $300,000, and sales of $480,000. Use the DuPont formula to compute the return on investment. If required, round your answers to two decimal places.

Answer 1

10% ; 1.6 times and 16%

Step-by-step explanation:

The computations are shown below:

As we know that

Profit margin is

= Income from operation ÷ Sales × 100

= $48,000 ÷ $480,000

= 10%

Investment turnover is

= Sales ÷ Invested assets

= $480,000 ÷ $300,000

= 1.6 times

And,

Return on investment is

= Profit margin × investment turnover

= 10% × 1.6 times

= 16%

Therefore, we applied the above formulas