Question

Please refer to the following information to answer all of question 1: Income statement (millions of...

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

Homework Answers

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%

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