Question

Griffey Junior Wear has $1,810,000 in assets and $692,000 of total debt. It reports net income of $161,000.

a. What is its ROA? (Do not round intermediate calculations. Round the final answer to 1 decimal place.)

Return on assets             %

b. What is the return on shareholders’ equity? (Do not round intermediate calculations. Round the final answer to 2 decimal places.)

Return on equity             %

c. If the firm has an asset turnover ratio of 1.80 times, what is the profit margin? (Round the final answer to 2 decimal places.)

Profit margin             %

Answer 1

	Given,
	Total assets	$1,810,000
	Total debts	$692,000
	Net income	$161,000
a)	Return on assets= (Net income/Total assets)*100
		(161000/1810000)*100
		8.9%
b)	Shareholders Equity= Total assets-Total debts
		$(1810000-692000)
		$1,118,000
	Return on equity= (Net income/Shareholders equity)*100
		(161000/1118000)*100
		14.40%
c)	Asset turnover ratio= 1.80 times
	Asset turnover= Net sales/Total assets
	1.80= Net sales/1810000
	Net sales= $3258000
	Profit margin= (Net income/Net sales)*100
		(161000/3258000)*100
		4.94%