Question

Online Learning​, Inc. has two​ divisions: Test Preparation and Language Arts. Results​ (in millions) for the past three years are partially displayed​ here:

				Operating	Operating	Operating
				Income /	Revenues /	Income /
	Operating	Operating	Total	Operating	Total	Total
	Income	Revenues	Assets	Revenues	Assets	Assets
Test Preparation Division
2015	$690	$9,200	$1,840	?	?	?
2016	850	?	?	10%	?	40%
2017	1,150	?	?	12.5%	4.0	?
Language Arts Division
2015	$600	$2,400	$1,600	?	?	?
2016	?	3,750	2,500	20%	?	?
2017	?	?	2,500	?	2.0	25%
Online Learning Inc.
2015	$1,290	$11,600	$3,440	?	?	?
2016	?	?	?	?	?	?
2017	?	?	?	?	?	?

Requirements

1.	Complete the table by filling in the blanks.
2	Use the DuPont method of profitability analysis to explain changes in the​operating-income-to-total-assets ratios over the 2015----2017 period for each division and for Online Learning as a whole. Comment on the results.

Answer 1

Table :-

	Operating income	Operating revenue	Total Assets	Operating income/ operating revenue	Operating revenue/ Total Assets	Operating Income/ Total Assets
Test Preparation Division
2015	$690	$9200	$1840	7.5%	5.0	37.5%
2016	$850	$8500	$2125	10%	4.0	40%
2017	$1150	$9200	$2300	12.5%	4.0	50%
Language Arts Division
2015	$600	$2400	$1600	25%	1.5	37.5%
2016	$750	$3750	$2500	20%	1.5	30%
2017	$625	$5000	$2500	12.5%	2.0	25%
Online Learning Inc.
2015	$1290	$11600	$3440	11.12%	3.37	37.5%
2016	$1600	$12250	$4625	13.06%	2.65	34.60%
2017	$1775	$14200	$4800	12.5%	2.96	36.98%

2. Changes in the operating income to total assets ratio :-

For Test Preparation division

As we can see that the ratio is increasing from 2015 to 2017. This ratio measures how efficiently uses its assets to generate revenue. As we can see in the above table that the operating income is increasing in a higher rate as compared to total assets.

For Language Arts Division

As we can see that the ratio is decreasing from 2015 to 2017. As we can see in the above table that total assets is increasing in a higher rate as compared to the operating income. It means that this division is not able to generate income in the ratio of increasing of its total assets. Hence this ratio is decreasing from 2015 to 2017

For Online Learning Inc

This is the average of both the divisions.