McBreen Company has income from operations of $96,000, invested assets of $400,000, and sales of $1,200,000

McBreen Company has income from operations of $96,000, invested assets of $400,000, and sales of $1,200,000. Use the DuPont formula to compute the rate of return on investment and show (a) the profit margin, (b) the investment turnover, and (c) the rate  of return on investment.

Answer:

a. Profit Margin = $96,000 ÷ $1,200,000 = 8.0% 

b. Investment Turnover = $1,200,000 ÷ $400,000 = 3.0 

c. Rate of Return on Investment = 8.0% × 3.0 = 24%