Question

3-8 Profitability Ratios In 2021, Jake's Jamming Music, Inc., announced an ROA of 8.56 percent, ROE of 14.5 percent, and profit margin of 20.5 percent. The firm had total assets of $9.5 million at year-end 2021. Calculate the 2021 values of net income available to common stockholders, common stockholders' equity, and net sales for Jake's Jamming Music, Inc. (LG3-4)

Answer 1

Answer -

Step - (1) -

Calculation of Net Income available to Common Stockholders

	Particulars	Calculation
I.	ROA	Given in question	8.56%
II.	Total Assets	Given in question	$9500000
Net Income		(I * II) = 8.56% * $9500000	$813200

.

Step - (2) -

Calculation of Common Stockholders' Equity

	Particulars	Calculation
I.	ROE	Given in question	14.5%
II.	Net Income	Calculated in Step - (1)	$813200
Common Stockholders' Equity		(II / I) = $813200 / 14.5%	$5608275.86

.

Step - (3) -

Calculation of Net Sales

	Particulars	Calculation
I.	Profit Margin	Given in question	20.5%
II.	Net Income	Calculated in Step - (1)	$813200
Net Sales		(II / I) = $813200 / 20.5%	$3966829.27