Question

*Exercise 18-8 Selected comparative statement data for Queen Products Company are presentec below. All balance sheet data are as of December 31. 2017 2016 Net sales $762,500 $715,000 Cost of goods sold 478,500 438,000 Interest expense 7,400 4,800 Net income 45,000 46,000 Accounts receivable 118,000 108,500 Inventory 83,300 74,800 Total assets 578,000 495,600 Total common stockholders' equity 428,300 329,300 Compute the following ratios for 2017. (Round answers to 1 decimal place, e.g. 1.6, or 1.6% .) Profit margin Asset turnover times Return on assets Return on common stockholders' equity

Answer 1

Answer-a)- Profit margin = (Net income/Net sales)*100

= ($45000/$762500)*100

= 5.9%

b)- Asset turnover =Net sales/Average Total assets

=$762500/($495600+$578000)/2

=$762500/$536800

=1.4 times

c)- Return on assets =(Net income/Average total assets)*100

={$45000/($495600+$578000)/2}*100

=($45000/$536800)*100

= 8.4%

d)- Return on common stockholder’s equity=Net income-Preferred dividends/Average common stockholder’s equity

= {$45000/($329300+$428300)/2}

= ($45000/$378800)*100

= 11.9%