E.F. Lynch Company is a diversified investment company with three operating divisions organized as investment centers. Condensed data taken from the records of the three divisions for the year ended June 30, 2014, are as follows:

The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations.

Required:

1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department charges.

2. Using the DuPont formula for rate of return on investment, compute the profit margin, investmetn turnover, and rate of return on investmetn for each division. If required, round your final answer to one decimal place.

3. When faced with limited funds for expansion, management should consider an expansion of the select Division first.

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Fee revenue Operating expenses Invested assets Mutual Fund Division $4,140,000 2,980,800 5,175,000 Electronic Brokerage Division $3,360,000 3,091,200 1,120,000 Investment Banking Division $4,560,000 3,739,200 3,800,000 Fee revenue Operating expenses Income from operations E.F. Lynch Company Divisional Income Statements For the Year Ended June 30, 2014 Mutual Fund Division Electronic Brokerage Division Investment Banking Division Mutual Fund Division Electronic Brokerage Division Investment Banking Division Profit Margin % % Investment Turnover 000 ROI % % % Fee revenue Operating expenses Invested assets Mutual Fund Division $4,140,000 2,980,800 5,175,000 Electronic Brokerage Division $3,360,000 3,091,200 1,120,000 Investment Banking Division $4,560,000 3,739,200 3,800,000 Fee revenue Operating expenses Income from operations E.F. Lynch Company Divisional Income Statements For the Year Ended June 30, 2014 Mutual Fund Division Electronic Brokerage Division Investment Banking Division Mutual Fund Division Electronic Brokerage Division Investment Banking Division Profit Margin % % Investment Turnover 000 ROI % % %

Answer rating: 100% (QA)

1 PARTICULARS MFD EBD IBD FEE REVENUE 4140000 3360000 ... View the full answer