Use the information below to calculate the profit margin inv

Use the information below to calculate the profit margin, investment turnover, and rate of return on investment using the DuPont formula for the company in 2015 and 2016. Determine if changes in the rate of return on investment are favorable or unfavorable. Show your work. 2016 $456,000 320,000 2015 $420,000 305,700 Sales Income from operations Invested assets 1,270,000 1,255,000

Solution

Calculate following ;

320000*100/456000 = 70.18%

Yes, its favorable because ROI is increased

	2016	2015
Profit margin	320000*100/456000 = 70.18%	305700*100/420000 = 72.79%
Turnover	456000/1270000 = 0.36 Times	420000/1255000 = 0.33 Times
ROI	70.18%*0.36 = 25.26%	72.79%*0.33 = 24.02%