Ratios Compared with Industry Averages You are analyzing the performance of Lumi

Question

Ratios Compared with Industry Averages You are analyzing the performance of Lumite Corporation, a manufacturer of personal care products, for the most recent year. The following data are taken from the firm's latest annual report: Quick assets Inventory and prepaid expenses Other assets Total Assets Dec. 31, 2013 Dec. 31, 2012 $290,000 860,000 4,165,000 3,700,000 $5,400,000 $4,770,000 $330,000 985,000 Current liabilities 1096 Bonds payable 7% Preferred stock Common stock, $5 par value Retained earnings Total Liabilltles and Stockholders' Equity $540,000 $440,000 1,340,000 1340,000 900,000 1,800,000 370,000 $5,400,000 $4,770,000 900,000 1,900,000 800,000 In 2013, net sales amount to $8,800,000, net income is $695,000, and preferred stock dividends paid are S65,000. Required Calculate the following ratios for 2013. Round answers to two decimal places. 1. Return on sales 34.05 2. Return on assets 1,850,000 % 3. Return on common stockholders' equity 34.05 X

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Net Income               695,000.00 Sales           8,800,000.00 Return on sales = 695,000/8,800,000 7.90% 2) Net Income               695,000.00 Average Assets = (5.4m + 4.77m)/2           5,085,000.00 Return on Assets 13.67% 3) Return on common stockholders equity Net Income               695,000.00 Less preference Dividend               (65,000.00) Income available for equity shareholder               630,000.00 Equity for 2013 = 1900,000 + 800,000           2,700,000.00 Equity for 2012 = 1800,000 + 370,000           2,170,000.00 Average Equity           2,435,000.00 Return on common stockholders equity = 630,000/2435,000 25.87%

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