Question

Return on Investment, Margin, Turnover Data follow for the Consumer Products Division of Kisler Inc.: Year 1 Year 2 Sales $9,310,000 $7,940,000 Operating income 523,222 307,278 Average operating assets 18,254,902 17,644,444 Required: 1. Compute the margin (as a percent) and turnover ratios for each year. Round your answers to two decimal places. Year 1 Year 2 Margin % % Turnover 2. Compute the ROI for the Construction Division for each year. Note: Enter percentage to two decimal places. ROI year 1 % ROI year 2

Answer 1

Answer:

1. Margin for Year 1= 5.62%, Margin for Year 2: 3.87%; Turnover for year 1 = 0.51, Turnover for year 2= 0.45

2. ROI for year 1 = 2.87%; ROI for year 2= 1.74%

Explanation:

Part 1: Calculate the margin and turnover ratios for each year (answers rounded up to two decimal places)

First, the formula for Margin and the formula for turnover

Margin= (Operating Income ÷ Sales)x 100

Turnover formula= Sales ÷ The Average Operating Assets.

Based on the formula,

Margin of Kisler Inc Year 1

= $523,222/ $9,310,000= 5.62%

Turnover of Kisler Inc. Year 1

= $9,310,000/$18,254,902= 0.51

Margin of Kisler Inc Year 2

= $307,278/$7,940,000 x 100= 3.87%

Turnover of Kisler Inc. Year 2

= $7,940,000/$17,644,444= 0.45

Part 2: Compute the Return On Investment for the Consumer Product Division fore Years 1 and 2

Return on Investment = (Margin x Turnover) x 100

ROI for Year 1 = 5.62% x 0.51 = 0.0562 x 0.51 x100 = 2.87%

ROI for Year 2 = 3.87% x 0.45 = 0.0387 x 0.45 x100 = 1.74%