FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Market Efficiency
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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 Electronic Brokerage Investment Banking Division Division Division Fee revenue $960,000 $990,000 $930,000 Operating 470,000 415,800 656,400 expenses Invested assets 3,500,000 2,900,000 1,900,000 The management of E.F. Lynch Company is evaluating each division as a basis for planning a future expansion of operations.
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Transcribed Image Text: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 Electronic Brokerage Investment Banking Division Division Division Fee revenue $960,000 $990,000 $930,000 Operating 470,000 415,800 656,400 expenses Invested assets 3,500,000 2,900,000 1,900,000 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 Division first.
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Transcribed Image Text: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 Division first.
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