Question

Jerry Rice and Grain Stores has $4,430,000 in yearly sales. The
firm earns 2 percent on each dollar of sales and turns over its
assets 4.5 times per year. It has $167,000 in current liabilities
and $342,000 in long-term liabilities.

**a.** What is its return on stockholders’ equity?
**(Do not round intermediate calculations. Input your answer
as a percent rounded to 2 decimal places.)
**

**b.** If the asset base remains the same as
computed in part *a*, but total asset turnover goes up to
4.75, what will be the new return on stockholders’ equity? Assume
that the profit margin stays the same as do current and long-term
liabilities. **(Do not round intermediate calculations. Input
your answer as a percent rounded to 2 decimal places.)
**

Answer #1

Sales = 4,430,000

Net profit margin = 2%

Asset turnover = 4.5 times = Sales/Assets

Assets = Sales/ Asset turnover = (4,430,000/4.5) = $ 984,444.44

Total liabilities = Current liabilities + Long term liabilities = 167,000 + 342,000 = $ 509,000

Equity = Total Assets - Total liabilities =984,444.44 - 509,000 = $ 475,444.44

Leverage = Assets/ Equity = (984,444.44/475,444. 44)

a)

**Return on Equity, ROE using Dupont = Net profit margin *
Asset turnover * Leverage**

**= 2% * 4.5 * (984,444.44/475,444. 44) =
18.63%**

**b)**

Total asset turnover = 4.75 times

**ROE = 2% * 4.75 * (984,444.44/475,444. 44) =
19.67%**

Jerry Rice and Grain Stores has $4,880,000 in yearly sales. The
firm earns 3 percent on each dollar of sales and turns over its
assets 2.8 times per year. It has $196,000 in current liabilities
and $359,000 in long-term liabilities.
a.
What is its return on stockholders’ equity? (Do not
round intermediate calculations. Input your answer as a percent
rounded to 2 decimal places.)
Return on
stockholders' equity
%
b.
If the asset base remains the same...

The Ellis Corporation has heavy lease commitments. Prior to
SFAS No. 13, it merely footnoted lease obligations in the
balance sheet, which appeared as follows: Use Appendix D for an
approximate answer but calculate your final answer using the
formula and financial calculator methods.
In $ millions
In $ millions
Current assets
$
55
Current liabilities
$
10
Fixed assets
55
Long-term liabilities
35
Total liabilities
$
45
Stockholders' equity
65
Total assets
$
110
Total liabilities and stockholders' equity...

The Ellis Corporation has heavy lease commitments. Prior to SFAS
No. 13, it merely footnoted lease obligations in the balance sheet,
which appeared as follows: Use Appendix D for an approximate answer
but calculate your final answer using the formula and financial
calculator methods. In $ millions In $ millions Current assets $ 70
Current liabilities $ 30 Fixed assets 70 Long-term liabilities 30
Total liabilities $ 60 Stockholders' equity 80 Total assets $ 140
Total liabilities and stockholders' equity...

The Ellis Corporation has heavy lease commitments. Prior to
SFAS No. 13, it merely footnoted lease obligations in the
balance sheet, which appeared as follows: Use Appendix D for an
approximate answer but calculate your final answer using the
formula and financial calculator methods.
In $ millions
In $ millions
Current assets
$
65
Current liabilities
$
20
Fixed assets
65
Long-term liabilities
35
Total liabilities
$
55
Stockholders' equity
75
Total assets
$
130
Total liabilities and stockholders' equity...

The balance sheet for Stud Clothiers is shown next. Sales for
the year were $3,490,000, with 75 percent of sales sold on
credit.
STUD CLOTHIERS
Balance Sheet 20X1
Assets
Liabilities and Equity
Cash
$
38,000
Accounts
payable
$
262,000
Accounts receivable
292,000
Accrued taxes
148,000
Inventory
248,000
Bonds payable (long-term)
178,000
Plant and equipment
500,000
Common stock
100,000
Paid-in capital
150,000
Retained earnings
240,000
Total assets
$
1,078,000
Total liabilities and
equity
$
1,078,000
Compute the following ratios: (Use a...

Here are simplified financial statements for Watervan
Corporation:
INCOME
STATEMENT
(Figures in $
millions)
Net sales
$
885.00
Cost of goods sold
745.00
Depreciation
35.00
Earnings before interest and taxes (EBIT)
$
105.00
Interest expense
16.00
Income before tax
$
89.00
Taxes
31.15
Net income
$
57.85
BALANCE SHEET
(Figures in $ millions)
End of Year
Start of Year
Assets
Current assets
$
373
$
320
Long-term assets
266
226
Total assets
$
639
$
546
Liabilities and shareholders’ equity...

Firm A and Firm B have debt–total asset ratios of 44 percent and
34 percent and returns on total assets of 8 percent and 14 percent,
respectively.
What is the return on equity for Firm A and Firm B? (Do
not round intermediate calculations and enter your answers as a
percent rounded to 2 decimal places, e.g., 32.16.)
Firm A
Firm B
Return on
equity
%
%

The Ellis Corporation has heavy lease commitments. Prior to
SFAS No. 13, it merely footnoted lease obligations in the
balance sheet, which appeared as follows: Use Appendix Dfor an
approximate answer but calculate your final answer using the
formula and financial calculator methods.
In
$ millions
In
$ millions
Current assets
$
60
Current liabilities
$
20
Fixed assets
60
Long-term liabilities
30
Total liabilities
$
50
Stockholders' equity
70
Total assets
$
120
Total liabilities and
stockholders' equity
$...

The Ellis Corporation has heavy lease commitments. Prior to
SFAS No. 13, it merely footnoted lease obligations in the
balance sheet, which appeared as follows: Use Appendix D for an
approximate answer but calculate your final answer using the
formula and financial calculator methods.
In $ millions
In $ millions
Current assets
$
75
Current liabilities
$
30
Fixed assets
75
Long-term liabilities
40
Total liabilities
$
70
Stockholders' equity
80
Total assets
$
150
Total liabilities and stockholders' equity...

The Ellis Corporation has heavy lease commitments. Prior to SFAS
No. 13, it merely footnoted lease obligations in the balance sheet,
which appeared as follows: Use Appendix D for an approximate answer
but calculate your final answer using the formula and financial
calculator methods. In $ millions In $ millions Current assets $ 85
Current liabilities $ 10 Fixed assets 85 Long-term liabilities 70
Total liabilities $ 80 Stockholders' equity 90 Total assets $ 170
Total liabilities and stockholders' equity...

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