\fMargin and Turnover One way to analyze the difference in return on investment for each division is to separate the return on investment formula into two calculations: margin and turnover. Margin shows the relationship between operating income and sales. It measures the prot earned for each dollar of sales, which is a measure of V . Turnover shows the relationship between sales and invested assets. It measures how many dollars of sales result from each dollar of invested assets, which is a measure of ' . The formulas for margin and turnover are: Margin : Tu rn over APPLY THE CONCEPTS: Calculating margin and turnover Calculate the margin and the turnover for each division. If required, round margin to the nearest tenth ofa percent [for example, 14.6%) and turnover to two decimal places (for example, 0.82). Division A Division B Division C The division showing the highest operating profitability is Division V . The division showing the highest operating efciency is Division ' . APPLY THE CONCEPTS: Using margin and turnover to calculate return on investment A second way to calculate return on investment (R01) is Return on Investment : Margin x Ttrnover. Using the margins and turnovers you recorded above, calculate the return on investment for each division. It reouired, round the return on investment to the nearest hundredth of a percent (for example, 16.94%]. Division A Division B Division C Return on investment I \"In i i % I I % Calculate the margin and the turnover for each division. If required, round margin to the nearest tenth of a percent (for example, 14.6242) and turnover to two decimal places (for example, 0.82). Division A Division B Division C The division showing the highest operating protability is Division ' . The division showing the highest operating efciech is Division ' . APPLY THE CONCEPTS: Using margin and turnover to calculate return on investment A second way to calculate return on investment (ROI) is Rett'n :in .ii'y"CZi'"Ei't = li'arg r x TI.Ir: investment to the nearest hundredth of a percent (for example, 16.94%}. . Using the margins and turnovers you recorded above, calculate the return on investment for each division. If required, round the return on Division A Division B Division C APPLY THE CONCEPTS: Determining which ROI formula to use There are two formulas for calculating ROI: 1. R01 2. ROI Operating income /' Invested Assets Margin x Turnover Why would a company use the second formula (ROI = Margin x Turnover] to calculate ROI" Select the YES or NO to the following statements. a. Margin can be tracked separately. ' b. If ROI changes, managers can determine which factor caused overall ROI _ to change. c. It is easier to calculate. V d. Turnover can be tracked separately. ' Both formulas give exactly the same information, so there is no reason to use the second formula