Answered step by step
Verified Expert Solution
Link Copied!

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 $1,420,000 $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 charges.

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 $ $ $
Operating expenses
Income from operations $ $ $

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 % %
Electronic Brokerage Division % %
Investment Banking Division % %

3. When faced with limited funds for expansion, management should consider an expansion of the (electronic brokeage or investment banking or mutual fund??) Division first.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management Principles And Practices

Authors: Timothy J. Gallagher

9th Edition

1954156103, 978-1954156104

More Books

Students also viewed these Finance questions

Question

Please complete the table

Answered: 1 week ago

Question

a. Describe the encounter. What made it intercultural?

Answered: 1 week ago