Question

Question 2 of 3 View Policies Current Attempt in Progress Selected financial statement data for Homer Company are presented below. Net sales Cost of goods sold Interest expense Net income Total assets (ending) Total common stockholders' equity (ending) $1,500,000 700,000 10,000 205,000 900,000 600,000 Total assets at the beginning of the year were $800,000; total common stockholders' equity was $500,000 at the beginning of the period. Calculate asset turnover. (Round answer to 2 decimal placea, e.g. 15.21%) Asset turnover

Answer 1

1. ASSET TURNOVER

Asset Turnover = Net Sales / Average total assets * 100

Average total assets = ($800,000 + $900,000) / 2 = $850,000

Asset Turnover = $1,500,000 / $850,000 * 100 = 176.47% or 1.76 times

2. PROFIT MARGIN

Profit Margin = Net Income / Net Sales * 100

Profit Margin = $205,000 / $1,500,000 * 100 = 13.7%

3. RETURN ON ASSETS

Return on Assets = Net Income / Average total assets * 100

Average total assets = ($800,000 + $900,000) / 2 = $850,000

Return on Assets = $205,000 / 850,000 * 100 = 24.1%

4. RETURN ON COMMON STOCKHOLDER'S EQUITY

Return on Common stockholder's equity = Net Income / Average total common stockholder's equity * 100

Average total common stockholder's equity = ($500,000 + $600,000) / 2 = $550,000

Return on Common stockholder's equity = $205,000 / $550,000 * 100 = 37.3%

All the best...