Gabbe Industries is a division of a major corporation. Last year the division had total sales of $8,910,000, net operating income of $962,280, and average operating assets of $3,000,000. The company's minimum required rate of return is 10%.Required:a. What is the division's margin?b. What is the division's turnover?c. What is the division's return on investment (ROI)?
What will be an ideal response?
a. Margin = Net operating income ÷ Sales = $962,280 ÷ $8,910,000 = 10.8%
b. Turnover = Sales ÷ Average operating assets = $8,910,000 ÷ $3,000,000 = 3.0
c. ROI = Net operating income ÷ Average operating assets = $962,280 ÷ $3,000,000 = 32.1%
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