Question

Assets
2019				Net Sales		$5,000,000.00
Cash & equivalents		$20,000.00		Variable Cost (75% of sales)		$3,750,000.00
Accounts Receivable		$15,000.00
Inventory		$10,000.00		Gross profit		$1,250,000.00
Total current assets		$45,000.00
				Fixed Cost		$100,000.00
Net Plant and equipment		$50,000.00		Earnings before interest, taxes dp and amort.		$1,150,000.00
Total assets		$95,000.00		Depreciation		$35,000.00
				Net OP. Income (EBIT)		$1,115,000.00
Liabilities and equity				Interest		$12,000.00
Accounts payable		$5,000.00		Earnings before taxes		$1,103,000.00
Accruals		$2,000.00		Taxes (40%)		$441,200.00
Notes payable		$10,000.00		Net Income		$661,800.00
Total current liabilities		$17,000.00
				Find the following ratios
Long term debts		$25,000.00		Inventory turnover
Total liabilities		$42,000.00		Total asset turnover
Common Equity		$43,000.00		Net profit margin
Retained earnings		10,000.00		Return on equity
Total common equity		$53,000.00
Total Liability and equity		$95,000.00

Answer 1

1) Inventory Turnover Ratio =

= = 500

Alternatively, Inventory turnover ratio can also be calculated using following formula-

2) Total Asset Turnover =    = = 52.63

3) Net Profit Margin=    = = 13.236%

4) Return on Equity =    = = 1248.68%

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