The Following Results for the Current Year Are for the Calvin

question 21

Essay

The following results for the current year are for the Calvin Division of Stinson Enterprises: Average operating assets are £500,000. The firm's minimum required rate of return is 10 per cent, the weighted average cost of capital is 8 per cent, and the tax rate is 30 per cent.
Required:
a.
Calculate profit margin for the division.
b.
Calculate asset turnover for the division.
c.
Calculate return on investment (ROI) for the division.
d.
Calculate economic value added (EVA) for the division.

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Definitions:

Investment Turnover

Investment turnover measures how efficiently a company generates sales from its investment in fixed assets.

Profit Margin

The percentage of revenue remaining after all expenses, taxes, and costs have been deducted from total sales.

Return on Investment

A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing the net profit by the cost of the investment.

Gross Profit

The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.