Question

Required: a. Firm A has a margin of 8%, sales of $630,000, and ROl of 16.8%. Calculate the firm's average total assets. b. Firm B has net income of $246,400, turnover of 1.1, and average total assets of $1,600,000. Calculate the firm's sales, margin, and ROI. c. Firm C has net income of $43,500, turnover of 2.9, and ROI of 23.2%. Calculate the firm's margin, sales, and average total assets.

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

E A B Answer - Parta) avearge total assets = (sales*margin)/ Rol = = (630000*8%)/16% = $ 315000 Thus the average total assets = $ 315000 Part b) Turnover = turnover ratio * average total assets = 1.1 *1600000 1 = $ 1760000 3 Margin = net profit / sales 4 = 246400/1760000 5 = 14% 7 ROI = net prfoit / average total assets 3 = 246400 / 1600000 9 = 15.4% 1 Thus the correct answer is 2 Turnover = $ 1760000 3 Margin = 14% 4 ROI = 15.4%

26 Part c) 27 average total assets = net income / ROI 28 = 43500/23.2% 29 = $ 187500 31 Sales = Average total assets * turnover ratio 32 = 187500*2.9 33 = $ 543750 34 35 Margin = net income / sales 36 = 43500 / 543750 37 = 8 % 38 39 Thus the final answer is 40 Avergae total assets = $ 187500 41 Sales = $ 543750 42 Margin = 8%