Question

2.00 points Jerry Rice and Grain Stores has $4.910,000 in 360 000 in long serm Babaes yearly sakes The em eams 2 percent on each dollar of sales and turns over its assets 2 3 times per year it has $135,000 n current abs a. What is ts return on stockholders equity? (Do not round i ntermediate calculations. Input your answer as a percent rounded to 2 decimal places.) b. It the asset base nemains the same as computed in part a but total asset turnover goes up to 2.00, what wil be the new return on stockhoiders equity? Assume that the proft margn as current and brgem labates (Do not round intermediate calculations, input your answer 3s percent rounded to 2 deemal peace HintseBook & Resources

Answer 1

a. first let us know the net income

=>sales *2%

=>$4,910,000 *2%

=>$98,200.

now,

let us know the total assets

=>sales / asset turnover

$4,910,000 / 2.3

=>$2,134,782.61.

total liabilities = 135,000+360,000

=>495,000

stock holders equity =total assets - total liabilities

=>2,134,782.61 - 495,000

=>$1,639,782.61.

now

return on stockholder's equity =net income / stock holders equity

=>98,200 / 1639782.61

=>98,200/1639782.61

=>0.05988599

=>5.99%.

b.new sale value

=> assets * asset turn over

=>2134782.61 *2.8

=>$5,977,391.31

new net income =$5,977,391.31 * 2%

=>$119,547.826.

return on stock holders equity =119,547.826 / 1639782.61

=>7.29%.