Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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 $1,560,000 $1,640,000 $1,570,000 Operating expenses 762,000 689,600 1,109,200 Invested assets 5,700,000 4,800,000 3,200,000 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 charges. E.F. Lynch Company Divisional Income Statements For the Year Ended June 30, 2048 Mutual Fund Division Electronic Brokerage Division Investment Banking Division Fee revenue $ 1,560,000 $ 1,640,000 $ 1,570,000 Operating expenses 762,000 1 689,600 1,109,200 Income from operations $ 798,000 $ 950,400 $ 460,800 2. Using the DuPont formula for rate of return on investment, compute the profit margin, investment turnover, and rate of return on investment for each division. Round your answers to one decimal place. Division Profit Margin Investment Turnover ROI Mutual Fund Division 0.27 x Electronic Brokerage Division 51.2 58 29.4 % % % 1.73 x 51 x % % 14.4 x % Investment Banking Division 0.491 x 3. When faced with limited funds for expansion, management should consider an expansion of the Electronic Brokerage Division first
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started