Recent financial statements for Madison Company follow: Account balances at the
ID: 2476878 • Letter: R
Question
Recent financial statements for Madison Company follow:
Account balances at the beginning of the company’s fiscal year were: accounts receivable, $140,000; and inventory, $360,000. All sales were on account. Assets at the beginning of the year totaled $1,020,000, and the stockholders’ equity totaled $685,000.
Return on total assets. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)
Return on common stockholders’ equity. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)
Recent financial statements for Madison Company follow:
Account balances at the beginning of the company’s fiscal year were: accounts receivable, $140,000; and inventory, $360,000. All sales were on account. Assets at the beginning of the year totaled $1,020,000, and the stockholders’ equity totaled $685,000.
1.Return on total assets. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)
2.Return on common stockholders’ equity. (Round your answer to 1 decimal place. Omit the "%" sign in your response.)
3. Was financial leverage positive or negative for the year? Madison Company Balance Sheet June 30 Assets Current assets: Cash Accounts receivable, net Merchandise inventony Prepaid expenses $ 20,000 190,000 320,000 8,000 Total current assets Plant and equipment, net 538,000 870,000 Total assets $1,408,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities Bonds payable, 8% 300,000 380,000 Total liabilities Stockholders' equity: 680,000 Common stock, $10 par value Retained earnings $180,000 548,000 Total stockholders' equity 728,000 Total liabilities and stockholders' equity $1,408,000 Madison Company Income Statement For the Year Ended June 30 Sales Cost of goods sold $2,210,000 1,210,000 Gross margin Selling and administrative expenses 1,000,000 650,000 Net operating income Interest expense 350,000 30,400 Net income before taxes Income taxes 319,600 95,880 Net income $ 223,720Explanation / Answer
Return on total assets=
1
2
Avg.
3
Yes ,there is positive financial leverage.
as return is more than bond cost even without cosidering tax on intrest effect.
20%>8%
Return On Assets (ROA) EBIT(Net Profit Before Tax)/Total Assets 319,600 / 1,408,000 0.2Related Questions
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