At December 31 Assets Cash Accounts recelvable, net Merchandise Inventory Prepal

Question

At December 31 Assets Cash Accounts recelvable, net Merchandise Inventory Prepald expenses Plant assets, net 2014 2013 2012 $ 30,800 $ 36,000 $ 37,000 88,100 64,000 50,000 111,000 80,000 53,000 10,750 9,275 4,900 281,000 254,500 228,000 Total assets $ 521,650 $ 443,775 $372,900 Liabilities and Equity Accounts payable Long-term notes payable secured by $129,200 $ 73,500 $ 51,600 mortgages on plant assets Common stock, $10 par value Retalned earnings 98,000 101,000 83,000 161,000 161,000 161,000 133.450 108,275 77,300 Total liablities and equity $ 521,650 $ 443,775 $372,900 The company's Income statements for the years ended December 31, 2014 and 2013, follow For Year Ended December 31 Sales Cost of goods sold Other operating expenses Interest expense Income taxes 2014 2013 715,000 $620,000 $ 436,150 207,350 11,700 9,300 $396,800 142,600 13,200 8,925 Total costs and expenses 664,500 561,525 Net Income $ 50,500 $ 58,475 Earnings per share $ 3.14 $3.63

Explanation / Answer

Answer 1. Profit Margin Ratio = Profit / Net Sales Profit Margin Ratio Choose Numerator / Choose Denominator = Profit Margin Ratio Profit / Net Sales = Profit Margin Ratio 2014                             50,500 /                                715,000 = 7.06% 2013                             58,475 /                                620,000 = 9.43% Answer 2. Total asset Turnover = Net Sales / Average Total Assets Total asset Turnover Choose Numerator / Choose Denominator = Total asset turnover Net Sales / Average Total assets = Total asset turnover 2014                           715,000 /                          482,712.50 = 1.48 Times 2013                           620,000 /                          408,337.50 = 1.52 Times Average Total Assets = (Opening Total Assets + Closing Total Assets)/2 Average Total Assets 2014 = (521650 + 443775)/2 = 482712.5 Average Total Assets 2013 = (443775 + 372900)/2 = 408337.50 Answer 3. Return on Total Assets = Profit / Average Total Assets Return on Total Assets Choose Numerator / Choose Denominator = Return on Total Assets Profit / Average Total assets = Return on Total Assets 2014                             50,500 /                          482,712.50 = 10.46% 2013                             58,475 /                          408,337.50 = 14.32% Also, Return on Total Assets = Profit Margin X Assets Turnover

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