Learning Materials
Features
Discover
Chapter 2: 5BP (page 24)
Elizabeth Tailors Inc. has assets of $8,940,000 and turns over its assets 1.9 times per year. Return on assets is 13.5 percent. What is the firm鈥檚 profit margin (returns on sales)?
The profit margin of the company is 7.11%.
Over 30 million students worldwide already upgrade their learning with 91影视!
All the tools & learning materials you need for study success - in one app.
Get started for free
A firm has net income before interest and taxes of \(193,000 and interest expense of \)28,100.
a. What is the times-interest-earned ratio?
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.
b. If the asset base remains the same as computed in part a, but total asset
turnover goes up to 3, what will be the new return on stockholders鈥� equity?Assume that the profit margin stays the same as do current and long-term
liabilities.
Identify whether each of the following items increases or decreases cash flow:
Increase in accounts receivable | Decrease in prepaid expenses |
Increase in notes payable | Increase in inventory |
Depreciation expense | Dividend payment |
Increase in investment | Increase in accrued expenses |
Decrease in account payable |
The Lancaster Corporation鈥檚 income statement is given below.
a. What is the times-interest-earned ratio?
Lancaster corporation | |
Sales | \(246,000 |
Cost of goods sold | 122,000 |
Gross profit | \)124,000 |
Fixed charges (other than interest) | 27,500 |
Income before interest and taxes | \(96,500 |
Interest | 21,800 |
Income before taxes | \)74,700 |
Taxes (35%) | 26,145 |
Income after taxes | $48,555 |
In January 2007, the Status Quo Company was formed. Total assets were \(544,000, of which \)306,000 consisted of depreciable fixed assets. Status
Quo uses straight-line depreciation of \(30,600 per year, and in 2007 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been \)29,000 per year each of the last 10 years. Other assets have not changed since 2007.
a. Compute return on assets at year-end for 2007, 2009, 2012, 2014, and 2016.
(Use $29,000 in the numerator for each year.)
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Flashcards 
91影视 AI 
Notes 
Study Plans 
Study Sets 
Find a degree 
Magazine