(a)
Profit margin: This ratio gauges the operating profitability by quantifying the amount of income earned from business operations from the sales generated.
Formula of profit margin:
Investment turnover: This ratio gauges the operating efficiency by quantifying the amount of sales generated from the assets invested.
Formula of investment turnover:
Formula of ROI according to Dupont formula:
Residual income: The remaining income from operations after deducting the desired acceptable income is referred to as residual income.
Formula of residual income:
Income from operations | XXX |
Less minimum acceptable income from operations as a percent of invested assets | XXX |
Residual income | XXX |
Table (1)
To determine: Return on investment of HO and VO Divisions, using Dupont formula
(b)
Residual income of for HO and VO division
(c)
To interpret: The working of HO and VO Divisions.
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Financial & Managerial Accounting
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