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:
To compute: Profit margin, investment turnover, and return on investment (ROI), and draft a memo to the president explaining the performance of N Division
Want to see the full answer?
Check out a sample textbook solutionChapter 23 Solutions
Financial & Managerial Accounting