Helton Corporation’s balance sheet indicates that the company has $500,000 invested in operating assets. During 2014, Helton earned operating income of $50,000 on $1,000,000 of sales.
a. Compute Helton’s profit margin for 2014.
b. Compute Helton’s turnover for 2014.
c. Compute Helton’s return on investment for 2014.
d. Recompute Helton’s ROI under each of the following independent assumptions.
(1) Sales increase from $1,000,000 to $1,200,000, thereby resulting in an increase in operating income from $50,000 to $56,000.
(2) Sales remain constant, but Helton reduces expenses, resulting in an increase in operating income from $50,000 to $52,000.
(3) Helton is able to reduce its invested capital from $500,000 to $400,000 without affecting operating income.