Divisional Income Statements and Return on Investment Analysis

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, 20Y8, are as follows:

	Mutual Fund Division		Electronic Brokerage Division		Investment Banking Division
Fee revenue	$1,690,000		$1,740,000		$1,670,000
Operating expenses	908,800		822,000		1,262,000
Invested assets	6,200,000		5,100,000		3,400,000

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

Required:

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

E.F. Lynch Company Divisional Income Statements For the Year Ended June 30, 20Y8

	Mutual Fund Division	Electronic Brokerage Division	Investment Banking Division
Fee revenue	$fill in the blank a4f4df05cfa5020_1	$fill in the blank a4f4df05cfa5020_2	$fill in the blank a4f4df05cfa5020_3
Operating expenses	fill in the blank a4f4df05cfa5020_4	fill in the blank a4f4df05cfa5020_5	fill in the blank a4f4df05cfa5020_6
Income from operations	$fill in the blank a4f4df05cfa5020_7	$fill in the blank a4f4df05cfa5020_8	$fill in the blank a4f4df05cfa5020_9

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1. For each division, subtract operating expenses from fee revenue.

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2. Using the DuPont formula for return on investment, compute the profit margin, investment turnover, and return on investment for each division. Round your answers to one decimal place.

Division	Profit Margin	Investment Turnover	ROI
Mutual Fund Division	fill in the blank 965d95011041ff6_1%	fill in the blank 965d95011041ff6_2	fill in the blank 965d95011041ff6_3%
Electronic Brokerage Division	fill in the blank 965d95011041ff6_4%	fill in the blank 965d95011041ff6_5	fill in the blank 965d95011041ff6_6%
Investment Banking Division	fill in the blank 965d95011041ff6_7%	fill in the blank 965d95011041ff6_8	fill in the blank 965d95011041ff6_9%

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

Electronic BrokerageInvestment BankingMutual FundElectronic Brokerage

Division first.