Carver Company's balance sheet and income statement are provided below:Carver CompanyBalance SheetDecember 31Assets?Cash$ 40,000Accounts receivable52,000Inventory80,000Plant and equipment, net of depreciation280,000Land held for future plant expansion 76,000Total assets$ 528,000??Liabilities and Stockholders' Equity?Accounts payable$ 45,000Notes payable58,000Capital stock, no par240,000Retained earnings 185,000Total liabilities and stockholders' equity$ 528,000Carver CompanyIncome StatementFor the Year Ended December 31Sales$ 330,000Less variable costs:? Manufacturing68,000 Selling and administrative 48,000Contribution margin$ 214,000Less fixed costs:? Manufacturing68,000
Selling and administrative 56,000Net income$ 90,000Required:Compute the margin, turnover, and return on investment for Carver Company.
What will be an ideal response?
Margin = net income ÷ sales = $90,000 ÷ $330,000 = 27.3%
Turnover = sales ÷ investment = $330,000 ÷ ($528,000 - $76,000) = .73
Return on investment = 27.3% × .73 = 19.9%
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