Alternate problem E The following selected data are for three companies:

Operating Net Net Assets Operating Income Sales Company 1 $ 1,404,000 $ 187,200 $ 2,059,200 Company 2 8,424,000 608,400 18,720,000 Company 3 37,440,000 4,914,000 35,100,000

a. Determine the operating margin, turnover of operating assets, and rate of return on operating assets for each company.

b. In the subsequent year, the following changes took place (no other changes occurred):
Company 1 bought some new machinery at a cost of USD 156,000. Net operating income increased by USD 12,480 as a result of an increase in sales of USD 249,600.
Company 2 sold some equipment it was using that was relatively unproductive.
The book value of the equipment sold was USD 624,000. As a result of the sale of the equipment, sales declined by USD 312,000, and operating income declined by USD 6,240.
Company 3 purchased some new retail outlets at a cost of USD 6,240,000. As a result, sales increased by USD 9,360,000, and operating income increased by USD 499,200.
• Which company has the largest absolute change in:

a. Operating margin ratio?

b. Turnover of operating assets?

c. Rate of return on operating assets?
• Which one realized the largest dollar change in operating income? Explain this change in relation to the changes in the rate of return on operating assets.