Question

Financial statements for Askew Industries for 2021 are shown below in thousands): - 4-12 Calculating ctivity and ofitability ratios L04-10 2021 Income Statement Net sales Cost of goods sold Gross profit Operating expenses Interest expense Income tax expense Net Income $9,000 (6,300) 2.700 (2,100) (200) (100) $ 300 Comparative Balance Sheets Dec. 31 2021 2020 Assets Cash Accounts receivable Inventory Property, plant, and equipment (net) $ 600 600 800 2,000 $4,000 $ 500 400 600 2,100 $3,600 Liabilities and Shareholders' Equity Current liabilities Bonds payable Common stock Retained earnings $1,100 1,400 600 900 $4,000 $ 850 1,400 600 750 $3,600 Required: Calculate the following ratios for 2021. 6. Profit margin on sales 7. Return on assets 8. Return on equity 9. Equity multiplier 10. Return on equity (using the DuPont framework)

Answer 1

9. Total auets Equity Multiplier Total Shareholders Eawity $3600 $600 6 times Return on Eauity (as per Dupont framewove) - Netprofit marginx Assets turnover x Equity multiplier Sales Assets turnover Average total auct. $9000 $3800 ? 2.37 Return on Eauity - 3.334 (6 x 2.37) 3.33-4- (14.22) - 0.47 2020/09/22 08:11

6. on sale Profit Margin Net Income X100 Net sales. $ 300 X 100 $ 9000 - 3.33.1 1092 Retum on allets Net Income Average total assets in $3,600 $4000 + 2 Avevage total assets - $ 3,800 Retum on asets = $300 $3,300 = 0.079 8. Return on Equity Net Income Average Shareholders Equity 600 + 600 Average Share holde Equity - 600 Return on Eauity $300 † 600 = 0.50 2020/09/22 08:11