The 2018 income statement for Anderson TV and Appliance reported sales revenue o
ID: 2341912 • Letter: T
Question
The 2018 income statement for Anderson TV and Appliance reported sales revenue of $420,000 and net income of $65,000. Average total assets for 2018 was $800,000. Shareholders' equity at the beginning of the year was $500,000 and $20,000 was paid to shareholders as dividends. There were no other shareholders' equity transactions that occurred during the year Show the DuPont framework's calculation of the three components of the 2018 return on shareholders' equity for Anderson TV and Appliance Profit Margin (%) Choose Numerator: Choose Denominator: Profit Margin Profit Margin Asset Turnover Choose Numerator: Choose Denominator: Return on Assets - Asset turnover times Equity multiplier Choose Numerator: Choose Denominator: Return on Shareholders' Equity Equity multiplier times quity (%) Return on Shareholders' Equity Return on shareholders' equity Choose Numerator: Choose Denominator:Explanation / Answer
Profit Margin (%)
Choose Numerator
/
Choose Denominator
=
Profit Margin
Net income
/
Sales revenue
=
Profit Margin
$ 65,000.00
/
$ 420,000.00
=
$ 0.15
Asset turnover
Choose Numerator
/
Choose Denominator
=
Asset turnover
Sales revenue
/
Average total assets
=
Asset turnover
$ 420,000.00
/
$ 800,000.00
=
$ 0.53
times
Equity mutiplier
Choose Numerator
/
Choose Denominator
=
Equity multiplier
Average total assets
/
Average shareholders' equity
=
Equity multiplier
$ 800,000.00
/
$ 522,500.00
=
$ 1.53
times
Return on Shareholders' equit
Choose Numerator
/
Choose Denominator
=
Return on Shareholders' equit
Net income
/
Average shareholders' equity
=
Return on Shareholders' equit
$ 65,000.00
/
$ 522,500.00
=
$ 0.12
Ending shareholders’ equity = Beginning shareholders’ equity + Net income – Dividends paid = $500,000 + $65,000 - $20,000 = $545,000
Average shareholders’ equity = (Ending shareholders’ equity + Beginning shareholders’ equity)/2 = ($500,000 + $545,000)/2 = $522,500
Profit Margin (%)
Choose Numerator
/
Choose Denominator
=
Profit Margin
Net income
/
Sales revenue
=
Profit Margin
$ 65,000.00
/
$ 420,000.00
=
$ 0.15
Asset turnover
Choose Numerator
/
Choose Denominator
=
Asset turnover
Sales revenue
/
Average total assets
=
Asset turnover
$ 420,000.00
/
$ 800,000.00
=
$ 0.53
times
Equity mutiplier
Choose Numerator
/
Choose Denominator
=
Equity multiplier
Average total assets
/
Average shareholders' equity
=
Equity multiplier
$ 800,000.00
/
$ 522,500.00
=
$ 1.53
times
Return on Shareholders' equit
Choose Numerator
/
Choose Denominator
=
Return on Shareholders' equit
Net income
/
Average shareholders' equity
=
Return on Shareholders' equit
$ 65,000.00
/
$ 522,500.00
=
$ 0.12
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.