Question

Tidy work and explanation

1. BE 22.64.ALGO (Algorithmic) Brief Exercise 12-64 (Algorithmic) Profitability Ratios Meade Publications is a magazine publisher established in Southern California. Financial analysts are concerned about Meade's ability to generate positive returns as printed material becomes less popular than digital material Financial analysts observe the following account balances from Meade to determine financial ratios Revenue Expenses Net income Assets Liabilities Average equity $1,155,000 1,050,000 350,000 937,500 175,000 600,000 Required: Compute Meade's return on equity. Round your answer to one decimal place. 2. BE.12.62.ALGO (Algorithmic) Brief Exercise 12-62 (Algorithmic) Debt Management and Short-Term Liquidity Ratios Magellan Company is an international travel agency providing travel planning services to customers in over 20 countries. Recently, the travel industry has been experiencing volatility as a result of increases in oil prices. Magellan's investors have been following its financial information closely to determine its ability to continue as a going concern. Its investors have used the following information to determine financial ratios: 2019 Current assets $6,720 Long-term assets 7,000 Current liabilities 1,600 Long-term liabilities 8,120 Stockholder's equity 4,000 2018 $3,200 2,800 2,000 0 4,000 Required: Between 2018 and 2019, indicate whether Magellan's debt to equity ratio and current ratio increased or decreased. Debt to equity ratio Current ratio

Answer 1

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1 Net income = $350,000 Average equity = $600,000 Meade's return on equity, ROE = Net income / Average equity = $350,000 / $600,000 = 0.583333333 = 58.3333333 % = 58.33% (Rounded) Ans : Return on equity = 58.33%