Return on investment, profit margin, and investment turnover
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Hi, I need some guidance for the following questions:
Consider the following information for HandyCraft Stores for 2011 and 2012.
2011 2012
Total assets $45,000,000 $51,300,000
Noninterest-bearing current liabilities 4,000,000 4,500,000
Net income 3,500,000 4,500,000
Interest expense 2,200,000 2,700,000
Sales 60,000,000 87,500,000
Tax rate 40% 40%
Required
a. Compute ROI for both years.
b. Break ROI down into profit margin and investment turnover.
c. Comment on the change in financial performance between 2011 and 2012.
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This solution helps explore financial concepts such as return on investment, profit margin and investment turnover. The solution is presented in a step-by-step fashion for clarity.
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