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Unformatted text preview: Operating Profit Margin: 500,000 / 4,500,000 = .11 (11%) Operating Return on Assets: (500,000/4,500,000)*(4,500,000/2,000,000) =.11 * 2.25 = .2475 (24.75%) = 25% B) .13 * (4,500,000/3,000,000) = .13 * 1.5 = .195 = 19.5% C) The way I understood the text, the operating profit margin is used to calculate the operating return on assets BEFORE interest expenses or taxes are taken out of the operating income. If this is the case, then the additional $50,000 rise in interest expense wouldnt have an effect on the operating profit margin....
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This note was uploaded on 08/29/2011 for the course BUSINESS 101 taught by Professor All during the Spring '11 term at Ashford University.
- Spring '11
- Ratio Analysis