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Gibson Corporation's balance sheet indicates that the company has $580,000 invested in operating assets. During the year, Gibson earned operating income of $67,280 on
Gibson Corporation's balance sheet indicates that the company has $580,000 invested in operating assets. During the year, Gibson earned operating income of $67,280 on $1,160,000 of sales. Required a. Compute Gibson's profit margin for the year. b. Compute Gibson's turnover for the year. c. Compute Gibson's return on investment for the year. d. Recompute Gibson's ROI under each of the following independent assumptions: (1) Sales increase from $1,160,000 to $1,392,000, thereby resulting in an increase in operating income from $67,280 to $76,560. (2) Sales remain constant, but Gibson reduces expenses, resulting in an increase in operating income from $67,280 to $69,600. (3) Gibson is able to reduce its invested capital from $580,000 to $464,000 without affecting operating income.
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