Question

SMOLIRA GOLF CORP. 2017 and 2018 Balance Sheets
Assets									Liabilities and Owners’ Equity
	2017				2018					2017				2018
Current assets									Current liabilities
Cash	$	24,136			$	25,000			Accounts payable	$	24,084			$	28,000
Accounts receivable		13,348				16,100			Notes payable		19,000				11,700
Inventory		26,722				28,000			Other		12,471				18,300
Total	$	64,206			$	69,100			Total	$	55,555			$	58,000
									Long-term debt	$	78,000			$	91,532
									Owners’ equity
									Common stock and paid-in surplus	$	60,000			$	60,000
									Accumulated retained earnings		204,346				223,468
Fixed assets
Net plant and equipment	$	333,695			$	363,900			Total	$	264,346			$	283,468
Total assets	$	397,901			$	433,000			Total liabilities and owners’ equity	$	397,901			$	433,000

SMOLIRA GOLF CORP. 2018 Income Statement
Sales					$	383,818
Cost of goods sold						257,000
Depreciation						48,300
Earnings before interest and taxes					$	78,518
Interest paid						15,200
Taxable income					$	63,318
Taxes (24%)						15,196
Net income					$	48,122
Dividends	$	29,000
Retained earnings		19,122

The company's profit margin is ____ percent. (Use year-end figures rather than average values where appropriate and enter your answer as a percent rounded to 2 decimal places).

The total asset turnover is ____ times. (Round your answer to two decimal places).

The equity multiplier is _____ times. (Round your answer to two decimal places).

Using the DuPont Identity, the company's ROE is _____ percent. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places).

Answer 1

a)Net profit margin = Net income /sales

                 = 48122 /383818

                 = .1253771 or 12.53771% (rounded to 12.54%)

b)Total asset turnover = Sales /Total asset

                     = 383818 / 433000

                    =.88642 (rounded to .89 times)

c)Equity Multiplier = Total asset /Total equity

               = 433000/283468

                = 1.52751 (rounded to 1.53 times)

d)Return on equity = Profit margin * Total asset turnover *Equity multiplier

            = .1253771 * .88642 * 1.52751

            = .1698 or 16.98%