Question

Check my won 2. Jerry Rice and Grain Stores has $4.240,000 in yearly sales. The firm earns 5 percent on each dollar of sales and turns over its assets 2.5 times per year. It has $141.000 in current liabilities and $397000 in long-term liabilities a. What is its return on stockholders' equity? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places) book Rebum on stockholders' equity Pri b. If the asset base remains the same as computed in part, but total asset turnover des up to 3.00, what will be the new retum on stockholders' equity Assume that the profit margin stays the same as do current and long-term labities. (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) New run on sochy GE < Prev 12 of 17H Next > BI o Type here to search 9 1 P9 BISM 922 B E R T А H J K SD A F G Z X CV N M. B All Prise Cin All

Answer 1

Req a.
Net Income
Net sales for the year	42,40,000
Multiply: Profit margin	5%
Net Income		2,12,000
Total assets:
Sales			42,40,000
Divide: Assets turnover ratio	2.5
Total assets:		16,96,000
Stockholder's equity:
Total assets		16,96,000
Less: Current liabilities	1,41,000
Less: Long term liabilities	3,97,000
Stockholder's equity:		11,58,000
Return on Stockholder's equity:
Net income for the year	2,12,000
Divide: Stockholder's equity	11,58,000
Return on Stockholder's equity:	18.31%
Req b.
Total assets:
Sales			42,40,000
Divide: Assets turnover ratio	3
Total assets:		14,13,333
Stockholder's equity:
Total assets		14,13,333
Less: Current liabilities	1,41,000
Less: Long term liabilities	3,97,000
Stockholder's equity:		8,75,333
Return on Stockholder's equity:
Net income for the year	2,12,000
Divide: Stockholder's equity	8,75,333
Return on Stockholder's equity:	24.22%