Easter Egg and Poultry Company has $1,040,000 in assets and $643,000 of debt. It reports net...
Easter Egg and Poultry Company has $1,040,000 in assets and $643,000 of debt. It reports net income of $193,000.
a. What is the firm's return on assets?
b. what is its return on stockholders' equity?
c. if the firm has an asset turnover ratio of 4.5 times, what is the profit margin (return on sales)?
Homework Answers
a. Return on Assets = Net Income / Total Assets
= $ 193,000 / $ 1,040,000
= 0.185576923
= 18.56%
b. Stockholder's equity = Total assets - debt
= $ 1,040,000 - $ 643,000
= $ 397,000
return on stockholders' equity = Net Income / Stockholder's equity
= $ 193,000 / $ 397,000
= 48.61%
c. The asset turnover ratio = Net Sales / Total Assets
4.5 = Net Sales / $ 1,040,000
Net Sales = $ 1,040,000* 4.5
= $ 4,680,000
Profit Margin = Net Income / Net Sales *100
= $ 193,000 / $ 4,680,000 *100
= 4.12%
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