Question

Question 10 (1 point)

The Golden Eagle Corporation has the following items on their income and balance sheets (values in tables are in thousands:

Balance Sheet Items
(Assets)

	Last Year	Two Years Ago
Cash	520	460
Accounts Receivable	560	510
Inventory	287	283
Total Current Assets
Fixed Assets	5200	4990
Depreciation	2385	2076
Net Fixed Assets

Balance Sheet Items
(Liabilities)

Accounts Payable	570	500
Notes Payable	87	93
Total Current Liabilities
Long Term Liabilities	1080	960
Total Liabilities
Preferred Stock	120	120
Common Stock	3379	3379
Retained Earnings	1370	1090
Total Liabilities and Equity

Income Statement Items

	Past Year	Two Years Ago
Sales	3180	2500
Cost of Goods Sold	1800	1720
Operating Expenses	570	540
Interest Paid	93	88
Taxes Paid	86	75
Preferred Stock Dividends Paid	99	22

Using the Dupont System of Analysis, what is the Return on Equity last year for Golden Eagle? (show answers to two decimal places.)

Your Answer:

Answer 1

Net Income = Sales - COGS - Operating Expenses - Interest -Taxes =3180 - 1800 -570 -93 -86 = 631
Total Assets = Cash+ Account Receivable + inventory + Fixed Assets - Depreciation = 520+560+287+5200-2385  =4182
Equity = Preferred Stock + Common Stock + Retained earnings = 120+3379+1370 =

DuPoint ratio for calculation of ROE includes net profit margin , Average assets turnover and Equity multiplier.

ROE = Net profit Margin* Asset Turnover * Equity Multiplier = Net Income/Sales * Sales/Total assets * Total Assets/equity
=631/3180*3180/4182*4182/4869 = 12.96%

please discuss in case of doubt