Question

Shelton, Inc., has sales of $17.5 million, total assets of $13.1 million, and total debt of $5.7 million. If the profit margin is 6 percent, what is net income? What is ROA? What is ROE? Sales Total assets Total debt Profit margin $ 17,500,000 $ 13,100,000 $ 5,700,000 5% 10 Complete the following analysis. Do not hard code values in your calculations. Net income Return on assets 12 13 15 16 17 18 19 Total equity Return on equity 21

Answer 1

Net Income

= Sales x Profit margin ratio

= $17,500,000 x 6%

= $ 1,050,000

Return on assets

= Net Income / Average total assets

= $ 1,050,000 / $13,100,000

= 0.0802 or 8.02%

Total equity

= Total assets – Total debt

= $13,100,000 - $5,700,000

= $ 7,400,000

Return on equity

= Net Income / Shareholder’s Equity

= $1,050,000 / $ 7,400,000

= 0.1419 or 14.19%