16BP_a Jerry Rice and Grain Stores has ... [FREE SOLUTION]

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Foundations Of Financial Management

Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen

Business Studies

16th Edition 路 768 pages

ISBN: 9781259277160

Chapter 2: 16BP_a (page 80)

Jerry Rice and Grain Stores has $4,780,000 in yearly sales. The firm earns 4.5 percent on each dollar of sales and turns over its assets 2.7 times per year. It has $123,000 in current liabilities and $349,000 in long-term liabilities.
a. What is its return on stockholders鈥� equity?

Short Answer

Expert verified

The return on the stockholder鈥檚 equity is 16.57%.

Step by step solution

Net Income

$\begin{array}{rcl} Net income & = & Sales 脳 Profit margin \\ = & $ 4, 780, 000 脳 4.5 % \\ = & $ 215, 100 \end{array}$

Total assets

$\begin{array}{rcl} Average total asset & = & \frac{Net sales}{Total asset turnover ratio} \\ = & \frac{$ 4, 780, 000}{2.7} \\ = & $ 1, 770, 370 \end{array}$

Shareholder’s equity

$\begin{array}{rcl} Shareholder' s equity & = & Total asset - Current liability - Long term liabilities \\ = & $ 1, 770, 370 - $ 123, 000 - $ 349, 000 \\ = & $ 1, 298, 370 \end{array}$

Return on equity

$\begin{array}{rcl} Return on shareholder' s equity & = & \frac{Net income}{Shareholder' s equity} \\ = & \frac{$ 215, 100}{$ 1, 298, 370} \\ = & 16.57 % \end{array}$

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	Allstate trucking	Industry
Return on sales	3%	8%
Return on assets	15%	10%

	20X1	20X2
Sales	\(8,000,000	\)10,000,000
Cost of goods sold	6,000,000	9,000,000
Inventory	800,000	1,000,000

Retained earning	Bond payable
Accounts payable	Accrued wages payable
Prepaid expenses	Accounts receivable
Plant and equipment	Capital in excess of par
Inventory	Preferred stock
Common stock	Marketable security

91影视

Jerry Rice and Grain Stores has \(4,780,000 in yearly sales. The firm earns 4.5 percent on each dollar of sales and turns over its assets 2.7 times per year. It has \)123,000 in current liabilities and $349,000 in long-term liabilities.
a. What is its return on stockholders鈥� equity?

Short Answer

Step by step solution

Net Income

Total assets

Shareholder’s equity

Return on equity

One App. One Place for Learning.

Most popular questions from this chapter

Recommended explanations on Business Studies Textbooks

Actuarial Science in Business

Intermediate Accounting

Influences On Business

Strategy

Corporate Finance

Project Planning & Management

Study anywhere. Anytime. Across all devices.

91影视

Jerry Rice and Grain Stores has \(4,780,000 in yearly sales. The firm earns 4.5 percent on each dollar of sales and turns over its assets 2.7 times per year. It has \)123,000 in current liabilities and $349,000 in long-term liabilities.a. What is its return on stockholders鈥� equity?

Short Answer

Step by step solution

Net Income

Total assets

Shareholder’s equity

Return on equity

One App. One Place for Learning.

Most popular questions from this chapter

Recommended explanations on Business Studies Textbooks

Actuarial Science in Business

Intermediate Accounting

Influences On Business

Strategy

Corporate Finance

Project Planning & Management

Study anywhere. Anytime. Across all devices.

Jerry Rice and Grain Stores has \(4,780,000 in yearly sales. The firm earns 4.5 percent on each dollar of sales and turns over its assets 2.7 times per year. It has \)123,000 in current liabilities and $349,000 in long-term liabilities.
a. What is its return on stockholders鈥� equity?