PALAWAN STATE UNIVERSITY

Main Campus

FINANCIAL MANAGEMENT AE22

Quiz 7 10.19.2020

Name: Ranjit Fiji C. Sandoval Course/ Year: BSA 3-1

Instruction: Answer the following requirement:

1. Your company earned an operating profit margin of 10% based on sales of P10M and total
assets of P5M last year.

a) What was the company’s total asset turnover ratio? 5 pts

Total Assets Turnover Ratio=10,000,000/5,000,000

Total Assets Turnover Ratio=2x

b) During the coming year, the company president has set a goal of attaining a total asset
turnover of 3.5 times. How much must firm sales rise, other things being the same, for
the goal to be achieved? State your answer in both peso amount and percentage
increase in sales. 5 pts

Sales=(Total Assets Turnover Ratio)(Total Assets)

Sales=(3.5)(5,000,000)
Sales=P17,500,000

Percentage Increases=Sales New/Prior Sales

Percentage Increases=17,500,000/10,000,000
Percentage Increases=1.75%

c) What was the company’s operating income return on investment last year? 5 pts
EBIT=(Sales)(Operating profit margin)
EBIT=(10,000,000)(10%)
EBIT=P1,000,000

Operating income ROI last year=EBIT/Total assets

Operating income ROI last year=1,000,000/5,000,000
Operating income ROI last year=20%
d) Assuming the firm’s operating profit margin remains the same, what will the operating
income return on investment be next year if the total asset turnover goal is achieved? 5
pts
EBIT=(Sales)(Operating profit margin)
EBIT=(17,500,000)(10%)
EBIT=P1,750,000

Operating income ROI=EBIT/Total assets

Operating income ROI=1,750,000/5,000,000
Operating income ROI=35%