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9 August, 22:47

Mason Corporation had $650,000 in invested assets, sales of $700,000, income from operations amounting to $99,000, and a desired rate of return of 15%.

A. What is the profit margin for Mason. B. What is the investment turnover for Mason. C. What is the residual income for Mason?

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  1. 9 August, 22:58
    0
    a) 14.1%

    b) 1.08

    c) $1500

    Explanation:

    Given invested assets = $650,000

    Sales = $700,000

    operation's income = $99,000

    a) Profit margin = net income/revenue * 100%

    Net income = operations income = $99000

    Total revenue = sales = $700000

    Profit margin = $99000/$700000*100%

    Profit margin = 14.1%

    b) investment turnover is the ratio of the net sales to the sum of equity and debt.

    Net sales = $700000

    Debt = $650,000 = invested assets

    Investment turnover = Net sales/debt

    Investment turnover = 700000/650000

    Investment turnover = 1.08

    c) residual income is the income generated after all debts and expenses has been paid.

    Residual income = income from operations - returns of investment

    Income from operations = $99000

    Return on investment = 15% of $650000 = $97500

    Residual income = $99000-$97500

    Residual income = $1500
  2. 10 August, 00:53
    0
    Profit margin is 14.1%

    investment turnover is 1.08 times

    residual income is $1,500

    Explanation:

    The profit margin=income from operations/sales

    income from operations=$99000

    sales=$700,000

    the profit margin=$99,000/$700000

    the profit margin=14.1%

    investment turnover=sales/invested assets

    sales as shown above

    invested assets = $650,000

    investment turnover=$700,000/$650,000

    investment turnover=1.08 times

    Residual income = income from operations less desired returns on investment

    income from operations is $99000

    desired investment return is 15%*$650,000=$97,500

    residual income=$99,000-$97,500

    residual income=$1500
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