Question

Briggs Company has operating income of $36,000, invested assets of $180,000, and sales of $720,000. Use the DuPont formula to compute the return on investment and show (a) the profit margin, (b) the investment turnover, and (c) the return on investment

Answer 1

Answer:

a. 5 %

b. 4.00

c. 20 %

Explanation:

(a) the profit margin,

profit margin = Net Income / Sales x 100

                      = $36,000 / $720,000 x 100

                      = 5 %

(b) the investment turnover, and

investment turnover = Sales ÷ Total Assets

                                  = $720,000 ÷ $180,000

                                  = 4.00

(c) the return on investment

return on investment = Net Income ÷ Total Assets

                                    = $36,000 /$180,000 x 100

                                    = 20 %