Wednesday, 1 April 2015

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:

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 $ 18,700,000  
  Net operating income $ 5,200,000  
  Average operating assets $ 36,200,000  


Required:
1. Compute the margin for Alyeska Services Company.
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Explanation:
1.
Margin =  
Net operating income
Sales
     
=  
$5,200,000
 = 27.81%
$18,700,000

2.
Turnover = 
Sales
Average operating assets
     
$18,700,000
 = 0.52
$36,200,000

3.
 ROI = Margin × Turnover
  = 27.81% × 0.52 = 14.46%