Question

Assets	2012	2013
Cash	45	50
A/R	331	111
Inventory	197	255
Total	573	416
Net Fixed Assets	1000	1200
Total Assets	1573	1616

Liabilities	2012	2013
Accounts Payable	157	308
Notes Payable	150	125
Total	307	433
Long-Term Debt	500	750
Common Stock	400	400
Retained Earnings	95	125
	1302	1708

	2013
Sales	3168
Cost of Goods Sold	2534.4
Depreciation	200
EBIT	433.6
Interest	80
Taxes	60
Net Income	293.6

A. What is the Profit Margin for 2013 ( to nearest 2 decimals)?

B. What is the Total Asset Turnover (to nearest two decimals)?

C. What is the Equity Multiplier for 2013 (to nearest 2 decimals)?

D. What is the Return on Equity for 2013 (to nearest 2 decimals)?

E. What is the Return on Assets for 2013 (to the nearest 2 decimals)?

Answer 1

Ans.A	Profit margin = Net income / Sales
	293.6 / 3168
	0.092676768	or    9.27%
Ans.B	Total assets turnover = Sales / Average assets
		3168 / 1594.5
		1.99	times
	*Average assets = (Beginning assets + Ending assets) / 2
		(1573 + 1616) / 2
		1594.5
Ans.C	Equity multiplier = Total assets / Total equity
		1616 / (400+125)
		3.08
Ans.D	Return on equity = Net income / Average equity
		293.6 / 510
		0.575686275	or 57.57%
	*Calculation of equity :
		2012	2013
	Common stock	400	400
	Retained earnings	95	125
	Total equity	495	525
	*Average equity = (Beginning equity + Ending equity) / 2
		(495 + 525) / 2
		510
Ans.E	Return on assets = Net income / Average assets
		293.6 / 1594.5
		0.184132957	or 18.41%
	*Average assets are calculated above in answer B.