• Company margin = net operating income / sales
• Turnover= sales / Average operating assets
• ROI

year Question 2: 7 marks) Presented below is information for Dafra Company for the 2021. Dafra Company Balance sheet December 31, 2021 January 1, 2021 Cash $ 55,000 $ 33,000 Account receivable 20,000 30,000 Inventory 65,000 60,000 Prepaid expense 15,000 10,000 Land held for future use 130,000 20,000 Building 120,000 110,000 Investment in Eagle company (an investment in another company) 8,000 7,000 Total assets 358,000 237,000 Account payable $ 38,000 $ 22,000 Income taxes payable 16,000 18.000 Bonds payable 130,000 20,000 Common stock 120,000 119,000 Retained earnings 92,000 80,000 Total liabilities and stockholders' equity 358000 237000 Dafra Company Income statement Sales $507,000 Operating expenses $350,00 Net operating income 157,000 Interest and taxes: Interest expense 18,000 Tax expense 17,750 Net income 121,250 The board of directors declared and paid a $30,000 cash dividend in 2021. The company's minimum required rate of return of 30%. Instructions a. Compute the company's margin, turnover, and return on investment (ROI) for year 2021. (1+1+1=3 marks) b. Compute the company residual income for year 2021. (1 mark) c. If the manager of Dafra company is evaluated based on ROI, will he/she want to make an investment of $200,000 that has the following characteristics? Justify your answer. (1.5+1.5=3 marks) Sales Contribution margin ratio Fixed expenses 200,000 50% of sales 40,000