Solution-Compute the divisions profit margin

Compute the divisions profit margin

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Reference no: EM131787244

Question:

Return on Investment and Residual Income

The financial results for the past two years for Ornamental Iron, a division of Iron Horse Company, follow.

Iron Horse Company
Ornamental Iron Division
Balance Sheet
December 31
This Year	Last Year
Assets
Cash	$ 5,000	$ 3,000
Accounts receivable	10,000	8,000
Inventory	30,000	32,000
Other current assets	600	600
Plant assets	128,300	120,300
Total assets	$173,900	$163,900
Liabilities and Stockholders' Equity
Current liabilities	$ 13,900	$ 10,000
Long-term liabilities	90,000	93,900
Stockholders' equity	70,000	60,000
Total liabilities and stockholders' equity	$173,900	$163,900
Iron Horse Company
Ornamental Iron Division
Income Statement
For the Years Ended December 31
This Year	Last Year
Sales	$ 180,000	$ 160,000
Cost of goods sold	(100,000)	(90,000)
Selling and administrative expenses	(27,500)	(26,500)
Operating income	$ 52,500	$ 43,500
Income taxes	17,850	14,790
After-tax operating income	$ 34,650	$ 28,710

1. Compute the division's profit margin, asset turnover, and return on investment for this year and last year. Beginning total assets for last year were $157,900. Round to two decimal places.

Reference no: EM131787244

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Compute the divisions profit margin

Reference no: EM131787244

Reference no: EM131787244

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