Alyeska Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below: Sales $17,600,000
Net operating income $6,200,000
Average operating assets $36,000,000

Required:
a. Compute the margin for Alyeska Services Company.
b. Compute the turnover for Alyeska Services Company.
c. Compute the return on investment (ROI) for Alyeska Services Company.

a. The margin for Alyeska Services Company: 35.23%

b. The turnover for Alyeska Services Company: 0.49

c. The return on investment (ROI) for Alyeska Services Company: 17.22%

Explanation:

a. The profit margin reflects a company's overall ability to turn income into profit, is calculated by formula:

Profit margin = (Net operating income/Net sales ) x 100% = $6,200,000/$17,600,000 x 100% = 35.23%

b. Asset turnover helps investors understand how effectively companies are using their assets to generate sales. Asset turnover is calculated by using following formula:

Asset Turnover =  Total Sales/ Average Total Assets  = $17,600,000/$36,000,000 = 0.49

c. Return on investment (ROI) is calculated by using following formula:

ROI = Net income/Total investment  x 100%

In Alyeska Services Company,

ROI = Net operating income/Average operating assets  x 100% = $6,200,000/$36,000,000 x 100% = 17.22%

answer; (c) penalty

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