Solution-Prepare condensed divisional income statements

Prepare condensed divisional income statements

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Reference no: EM132687330

Problem - Divisional income statements and rate of return on investment analysis - Edward Baird 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, 2012, are as follows:

	Mutual Fund Division	Electronic Brokerage Division	Investment Banking Division
Fee Revenue	$3,450,000	$2,800,000	$3,800,000
Operating Expenses	2,415,000	2,632,000	2,850,000
Invested assets	5,750,000	800,000	4,750,000

The management of Edward Baird Company is evaluating each division as a basis for planning a future expansion of operations.

Instructions -

1. Prepare condensed divisional income statements for the three divisions, assuming that there were no service department charges.

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.

3. If available funds permit the expansion of operations of only one division, which of the divisions would you recommend for expansion, based on parts (1) and (2)? Explain.

Reference no: EM132687330

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Prepare condensed divisional income statements

Reference no: EM132687330

Reference no: EM132687330

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