McBreen Company has income from operations of $96,000, invested assets of $400,0

Question

McBreen Company has income from operations of $96,000, invested assets of $400,000, and sales of $1,200,000. Use the DuPont formula to compute the rate of return on investment and show:
a] the profit margin b] the investment turnover c] the rate of return on investment McBreen Company has income from operations of $96,000, invested assets of $400,000, and sales of $1,200,000. Use the DuPont formula to compute the rate of return on investment and show:
a] the profit margin b] the investment turnover c] the rate of return on investment
a] the profit margin b] the investment turnover c] the rate of return on investment

Explanation / Answer

A. the profit margin - (Net Income/Revenues) =(96000/1200000) = 8%

B.the investment turnover = (Revenues/Total Assets) = (1200000/400000) = 3 times

C.the rate of return on investment = (96000/400000) = 24%

ROE = (Net Income/Revenues) x (Revenues/Total Assets) x Financial leverage

  '=(96000/1200000)*(1200000/400000)*1

= 24%

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