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	$1,420,000		$1,470,000		$1,430,000
Operating expenses	764,800		696,000		1,082,000
Invested assets	5,200,000		4,300,000		2,900,000

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 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 13745007bfc0028_1	$fill in the blank 13745007bfc0028_2	$fill in the blank 13745007bfc0028_3
Operating expenses	fill in the blank 13745007bfc0028_4	fill in the blank 13745007bfc0028_5	fill in the blank 13745007bfc0028_6
Income from operations	$fill in the blank 13745007bfc0028_7	$fill in the blank 13745007bfc0028_8	$fill in the blank 13745007bfc0028_9

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 75ef80fb4062fe0_1%	fill in the blank 75ef80fb4062fe0_2	fill in the blank 75ef80fb4062fe0_3%
Electronic Brokerage Division	fill in the blank 75ef80fb4062fe0_4%	fill in the blank 75ef80fb4062fe0_5	fill in the blank 75ef80fb4062fe0_6%
Investment Banking Division	fill in the blank 75ef80fb4062fe0_7%	fill in the blank 75ef80fb4062fe0_8	fill in the blank 75ef80fb4062fe0_9%

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

Electronic BrokerageInvestment BankingMutual Fund

Division first.