Divisional Income Statements and Return on Investment Analysis E.F. Lynch Company is a diversified investment company with three operating divisions organized as A decentralized unit in which the manager has the responsibility and authority to make decisions that affect not only costs and revenues but also the fixed assets invested in the center.investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y8, are as follows: Mutual FundDivision ElectronicBrokerageDivision InvestmentBankingDivision Fee revenue $2,510,000 $2,630,000 $2,510,000 Operating expenses 1,350,800 1,105,400 1,898,000 Invested assets 9,200,000 7,700,000 5,100,000 The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations. Required: 1. Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations. E.F. Lynch Company Divisional Income Statements For the Year Ended June 30, 20Y8 MutualFundDivision ElectronicBrokerageDivision InvestmentBankingDivision Fee revenue $ $ $ Operating expenses Operating income $ $ $ 2. Using the An expanded expression of return on investment determined by multiplying the profit margin by the investment turnover.DuPont formula for A measure of managerial efficiency in the use of investments in assets, computed as operating income divided by invested assets.return on investment, compute the A component of the return on investment, computed as the ratio of operating income to sales.profit margin, A component of the return on investment, computed as the ratio of sales to invested assets.investment turnover, and return on investment for each division. Round your answers to one decimal place. Division Profit Margin Investment Turnover ROI Mutual Fund Division % % Electronic Brokerage Division % % Investment Banking Division % % 3. When faced with limited funds for expansion, management should consider an expansion of the Electronic Brokerage Investment Banking Mutual Fund Division first.
Divisional Income Statements and Return on Investment Analysis
E.F. Lynch Company is a diversified investment company with three operating divisions organized as A decentralized unit in which the manager has the responsibility and authority to make decisions that affect not only costs and revenues but also the fixed assets invested in the center.investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 20Y8, are as follows:
Mutual Fund Division |
Electronic Brokerage Division |
Investment Banking Division |
||||
| Fee revenue | $2,510,000 | $2,630,000 | $2,510,000 | |||
| Operating expenses | 1,350,800 | 1,105,400 | 1,898,000 | |||
| Invested assets | 9,200,000 | 7,700,000 | 5,100,000 |
The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations.
Required:
1. Prepare condensed divisional income statements for the three divisions, assuming that there were no support department allocations.
| E.F. Lynch Company | |||
| Divisional Income Statements | |||
| For the Year Ended June 30, 20Y8 | |||
| Mutual Fund Division |
Electronic Brokerage Division |
Investment Banking Division |
|
| Fee revenue | $ | $ | $ |
| Operating expenses | |||
| Operating income | $ | $ | $ |
2. Using the An expanded expression of return on investment determined by multiplying the profit margin by the investment turnover.DuPont formula for A measure of managerial efficiency in the use of investments in assets, computed as operating income divided by invested assets.return on investment, compute the A component of the return on investment, computed as the ratio of operating income to sales.profit margin, A component of the return on investment, computed as the ratio of sales to invested assets.investment turnover, and return on investment for each division. Round your answers to one decimal place.
| Division | Profit Margin | Investment Turnover | ROI |
| Mutual Fund Division | % | % | |
| Electronic Brokerage Division | % | % | |
| Investment Banking Division | % | % |
3. When faced with limited funds for expansion, management should consider an expansion of the
- Electronic Brokerage
- Investment Banking
- Mutual Fund
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