Question

Computing, Analyzing, and Interpreting Return on Equity and Return on Assets Following are summary financial statement data for Logitech International for 2016 through 2018. $ thousands Sales Net income 2018 2017 2016 $2,566,863 $2,221,427 $2,018,100 208,542 205,876 119,317 1,743,157 1,498,677 1,324,147 1,050,557 856,111 759,948 Total assets Equity

a. Compute the return on assets (ROA) for 2018 and 2017. Round answers to one decimal place (ex: 0.2345 = 23.5%).

b. Compute the profit margin (PM) for 2018 and 2017.
Round answers to one decimal place (ex: 0.2345 = 23.5%).

c. Compute the asset turnover (AT) for 2018 and 2017.
Round answers to two decimal places.

d. Which component of ROA (profit margin or asset turnover or both) drives the change in ROA in 2018?

e. Compute the return on equity (ROE) for 2018 and 2017.
Round answers to one decimal place (ex: 0.2345 = 23.5%).

f. Logitech repurchased common shares in 2018 at a cost of $30 million. Did this repurchase increase or decrease the company’s ROE?

Answer 1

Net income a Retum on asset Average Asset For year 2017 205876 (148643 +1324147)/2 l'hoop 205876 1411 412 = 124.62 For the year dolg e las 208 542 1743157+ 1498677 )/2 208542 1620917 12.9% FOS

b) Profit margine protit Sales 2 Not income Sales For the year 2017 31 205876 90% 2221427 9.3% For the year 2018 208542 8.1 %. 21566 863 810 o Asset Turnover 50 Tumover CA Average Assets For year 2017 - 2221427 1.57 1411412 For year 2018 25 66863 1620917 1.58

the profit margine ? we con say that has caused the Le change of ROA in 2018. Because Pn 2017 Goo protit margine Caso is 9.3% and in 2018 it's 817, But in case Asset Turn over both are alsnost same ie, 1.57 and 1.58 times. Not income e) Retum on cawly a Average equity i sot For the your 2017 ) 205-876 (+19869711324147)/2 way 205876 (856111 + 759 948)/2 205876 208029.5 25.5%

208542 For the year 2018 - (1050554485611) / 208542 953334 lovoron & = 21.9% Rorreth Logitech repurchased common share $30 milion in 2018 / in ROE the eqwiy share is in Denominator Net income ie, Cales Average cavity so it will decreas the Rot value.