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	$2,380,000		$2,460,000		$2,360,000
Operating expenses	1,283,800		1,164,000		1,784,000
Invested assets	8,700,000		7,200,000		4,800,000

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 741cf007effdfa6_1	$fill in the blank 741cf007effdfa6_2	$fill in the blank 741cf007effdfa6_3
Operating expenses	fill in the blank 741cf007effdfa6_4	fill in the blank 741cf007effdfa6_5	fill in the blank 741cf007effdfa6_6
Income from operations	$fill in the blank 741cf007effdfa6_7	$fill in the blank 741cf007effdfa6_8	$fill in the blank 741cf007effdfa6_9

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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 36b87ef9603f007_1%	fill in the blank 36b87ef9603f007_2	fill in the blank 36b87ef9603f007_3%
Electronic Brokerage Division	fill in the blank 36b87ef9603f007_4%	fill in the blank 36b87ef9603f007_5	fill in the blank 36b87ef9603f007_6%
Investment Banking Division	fill in the blank 36b87ef9603f007_7%	fill in the blank 36b87ef9603f007_8	fill in the blank 36b87ef9603f007_9%

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

Electronic Brokerage Investment Banking Mutual Fund

Division first.