Question

Please refer to the following information to answer all of question 1:
Income statement (millions of dollars)
Net sales	$ 137,579
COGS	$ 102,180
Other Expenses	$ 17,171
Depreciation	$ 8,514
EBIT	$   9,714
Interest Expense	$   255
Income Before Tax	$   9,459
Tax Expense (35%)	$   3,311
Net income	$ 6,148
Dividends	$   2,500
Balance sheet (millions of dollars)
Cash	$ 700
Accounts Receivable	$ 12,000
Inventories	$ 7,500
Other Assets	$ 5,000
Property, Plant and Equipment, net	$110,000
Other Long-Term Assets	$ 5,700
Accounts Payable	$ 10,000
Short-Term Debt	$ 6,800
Other Current Liabilities	$   3,000
Long-Term Debt & Leases	$ 25,000
Other Long-Term Liabilities	$ 12,000
Shareholder’s Equity	$ 50,000
1a Calculate Return on Equity
1b-Calculate Return on Assets
1c-Calculate Net Profit Margin

Answer 1

Answer 1-a.

Return on Equity = Net Income / Shareholders’ Equity
Return on Equity = $6,148 / $50,000
Return on Equity = 0.1230 or 12.30%

Answer 1-b.

Total Assets = Cash + Accounts Receivable + Inventories + Other Assets + Property, Plant and Equipment, net + Other Long-term Assets
Total Assets = $700 + $12,000 + $7,500 + $5,000 + $110,000 + $5,700
Total Assets = $140,900

Return on Assets = Net Income / Total Assets
Return on Assets = $6,148 / $140,900
Return on Assets = 0.0436 or 4.36%

Answer 1-c.

Net Profit Margin = Net Income / Net Sales
Net Profit Margin = $6,148 / $137,579
Net Profit Margin = 0.0447 or 4.47%