Q3BP Polly Esther Dress Shops Inc. ca... [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: Q3BP (page 78)

Polly Esther Dress Shops Inc. can open a new store that will do an annual sales volume of $837,900. It will turn over its assets 1.9 times per year. The profit margin on sales will be 8 percent. What would net income and return on assets (investment) be for the year?

Short Answer

Expert verified

The net income of the company is $67,032, and the return on assets for the year is 15.20%.

Step by step solution

Net Income

$\begin{array}{rcl} N e t i n c o m e & = & S a l e s 脳 P r o f i t m a r g i n \\ = & $ 837, 900 脳 8 % \\ = & $ 67, 032 \end{array}$

Calculation of total assets

$\begin{array}{rcl} A v e r a g e T o t a l a s s e s t s & = & \frac{N e t s a l e s}{A s s e s t s t u r n o v e r r a t i o s} \\ = & \frac{$ 837, 900}{1.90} \\ = & $ 441, 000 \end{array}$

Calculation of Return on assets

$\begin{array}{rcl} R e t u r n o n a s s e s t s & = & \frac{N e t I n c o m e}{T o t a l A s s e s t s} \\ = & \frac{$ 67, 032}{$ 441, 000} \\ = & 15.20 % \end{array}$

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Selling and administrative expenses	$328,000
Depreciation expenses	195,000
Sales	1,660,000
Interest expenses	129,000
Cost of goods sold	560,000
Taxes	171,000

	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

March	\(41,000
April	50,000
May	32,000
June	47,000
July	58,000
August	62,000

Outcome	Probability	Units	Price
A	0.70	225	$20
B	0.10	370	35
C	0.20	510	45

91影视

Polly Esther Dress Shops Inc. can open a new store that will do an annual sales volume of $837,900. It will turn over its assets 1.9 times per year. The profit margin on sales will be 8 percent. What would net income and return on assets (investment) be for the year?

Short Answer

Step by step solution

Net Income

Calculation of total assets

Calculation of Return on assets

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