Question

Fillips-Von Hausen,an apparel manufacturer, reported net income (amounts in thousands) for Year 4 of $59,599 on sales of $11,583,085. It declared preferred dividends of $21,491. Preferred shareholders’ equity totaled $263,317 at both the beginning and end of Year 4. Common shareholders’ equity totaled $324,633 at the beginning of Year 4 and $362,389 at the end of Year 4. Fillips-Von Hausen had no noncontrolling interest in its equity. Total assets were $1,403,032 at the beginning of Year 4 and $1,524,201 at the end of Year 4. Compute the following metrics for Year 4: (a) Return on Common Equity (ROCE)

(b) Profit Margin for ROCE (PMROCE)

(c) Asset Turnover (AT)

(d) Capital Structure Leverage Ratio (CSLR)

Answer 1

a) Return on common equity = Earning Available for Equity shareholders / Average Common Shareholders Equity at beginning of the year * 100

= (59,599 - 21491)/ [(324,633+ 362,389)/2] * 100 = 11.0936 % (Approximately)

b) Profit Margin for ROCE = Net Income/Average Capital Employed = 59,599 / [(324,633+ 362,389 + 263317 + 263317)/2] = 9.8214% approximately

c) Asset Turnover = Total Sales / Average Total Assets = 11583085 / [1403032 + 1524201)/2] = 7.91 times approximately

d)Capital Structure Leverage Ratio = Average Debt / Average Capital Employed

= {[(1403032 - 263317 - 324633) + (1524201 - 263317 - 362389)]/2}/ [1403032 + 1524201)/2] = 856788.5/1463616.5 = 0.58 times approximately.

NOTE: Not sure about part b of the answer. Thanks and regards