Question

Tyler Toys, Inc. Income Statement for Years Ending December 31, 2013 and 2014 2014 2013 Revenue...

Tyler Toys, Inc.

Income Statement for Years Ending December 31, 2013 and 2014

2014

2013

Revenue

$14,147,783

$13,567,385

Cost of goods sold

$-8,448,339

$-8,131,598

Selling, general, and administrative expenses

$-997,405

$-981,777

Depreciation

$-1,498,996

$-1,472,330

EBIT

$3,203,043

$2,981,680

Interest expense

$-376,836

$-355,857

Taxes

$-1,073,959

$-997,813

Net income

$1,752,248

$1,628,010

Tyler Toys, Inc.

Balance Sheet as of December 31, 2013 and 2014

ASSETS

2014

2013

LIABILITIES

2014

2013

Current assets

Current liabilities

Cash

$191,079

$187,689

Accounts payable

$1,545,537

$1,456,598

Investments

$180,682

$120,303

Short-term debt

$312,679

$332,000

Accounts receivable

$668,721

$630,910

Total current liabilities

$1,858,216

$1,788,598

Inventory

$587,558

$564,837

Long-term liabilities

Total current assets

$1,628,040

$1,503,739

Debt

$7,285,436

$6,603,166

Long-term assets

Other liabilities

$1,462,886

$1,345,793

Investments

$3,054,998

$2,827,292

Total liabilities

$10,606,538

$9,737,557

Plant, property, and equipment

$8,497,368

$8,480,129

OWNERS’ EQUITY

Goodwill

$348,476

$346,686

Common stock

$1,457,797

$1,454,449

Intangible assets

$1,157,304

$957,363

Retained earnings

$2,621,851

$2,923,203

Total owners’ equity

$4,079,648

$4,377,652

TOTAL LIABILITIES

TOTAL ASSETS

$14,686,186

$14,115,209

AND OWNERS’ EQUITY

$14,686,186

$14,115,209

Financial​ ratios: Profitability. The financial statements for Tyler​ Toys, Inc. are shown in the popup​ window: (popup window info shown above). Calculate the profit​ margin, return on​ assets, and return on equity for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the​ shareholders?

What is the profit margin for​ 2014?

_____% (Round to two decimal​ places.)

What is the profit margin for​ 2013?

______% (Round to two decimal​ places.)

What is the return on assets for​ 2014?

______​% (Round to two decimal​ places.)

What is the return on assets for​ 2013?

_____% (Round to two decimal​ places.)

What is the return on equity for​ 2014?

_____​% (Round to two decimal​ places.)

What is the return on equity for​ 2013?

______% ​(Round to two decimal​ places.)

Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the​ shareholders?  ​(Select the best​ response.)

A. These ratios indicate a somewhat weak firm performance for the equity holders with an ROE of over 42.95% for 2014.

B.These ratios indicate a somewhat strong firm performance for the equity holders with an ROE of over 42.95% for 2014.

C.These ratios indicate a somewhat strong firm performance for the equity holders with an ROE of over 42.95% for 2013.

D.These ratios indicate a somewhat weak firm performance for the equity holders with an ROE of over 42.95% for 2013.

Homework Answers

Answer #1

Profit margin = Net income / sales

2013 profit margin = 1,628,010 / 13,567,385 = 12.00%

2014 profit margin = 1,752,248 / 14,147,783 = 12.39%

Return on assets = Net income / total assets

2013 return on assets = 1,628,010 / 14,115,209 = 11.53%  

2014 return on assets = 1,752,248 / 14,686,186 = 11.93%

Return on equity = Net income / shareholder's equity

2013 return on equity = 1,628,010 / 4,377,652 = 37.19%  

2014 return on equity = 1,752,248 / 4,079,648 = 42.95%

These ratios indicate a somewhat strong firm performance for the equity holders with an ROE of over 42.95% for 2014.

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