Linda’s Clothing is a retailer of contemporary women’s clothing. Selected financ
ID: 2492935 • Letter: L
Question
Linda’s Clothing is a retailer of contemporary women’s clothing. Selected financial information for Linda’s appears below:
2011
2010
2009
2008
Net Income
$ 56,759
$ 31,150
$ 15,375
$14,750
Total Assets at year-end
$381,500
$246,250
$145,490
$71,268
Weighted Average number of shares
Outstanding
84,215
80,546
77,965
75,888
Total Liabilities at year-end
205,967
119,657
60,522
17,623
Common Stockholders' Equity at year-end
$175,533
$126,593
$ 84,968
$53,645
Interest Expense
165
195
258
368
Required:
a.
Compute the rate of return on assets for the years 2009-2011. Linda’s has an effective tax rate of 35%.
b.
Compute the rate of return on common shareholders’ equity for the years 2009-2011.
c.
Compute basic earnings per share for the years 2009-2011.
d.
Interpret the changes in ROA versus ROCE and EPS over the three-year period.
2011
2010
2009
2008
Net Income
$ 56,759
$ 31,150
$ 15,375
$14,750
Total Assets at year-end
$381,500
$246,250
$145,490
$71,268
Weighted Average number of shares
Outstanding
84,215
80,546
77,965
75,888
Total Liabilities at year-end
205,967
119,657
60,522
17,623
Common Stockholders' Equity at year-end
$175,533
$126,593
$ 84,968
$53,645
Interest Expense
165
195
258
368
Explanation / Answer
2011 2010 2009 2008 rate of retun on totala assets 56759*(1-0.35)/381500 31150*(1-0.35)/246250 15375*(1-0.35)/145490 14750*(1-0.35)/71268 9.675 8.22% 6.87% 13.45% Rate of return on common stock 56759*(1-0.35)/175533 31150*(1-0.35)/126593 15375*(1-0.35)/84968 14750*(1-0.35)/53645 21.02% 15.99% 11.76% 17.87% Basic EPS 0.438 0.251 0.128 0.126
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