Lymen International is considering a significant expansion to its product line.
ID: 2515670 • Letter: L
Question
Lymen International is considering a significant expansion to its product line. The sales force is excited about the opportunities that the new products will bring. The new products are a significant step up in quality above the company’s current offerings, but offer a complementary fit to its existing product line. Fred Riddick, senior production department manager, is very excited about the high-tech new equipment that will have to be acquired to produce the new products. Barbara Dyson, the company’s CFO, has provided the following projections based on results with and without the new products.
Without New Products
With New Products
Without new products
With new products
Without New Products
With New Products
Sales revenue $11,909,300 $16,483,300 Net income $495,800 $897,800 Average total assets $5,908,200 $13,540,800Explanation / Answer
Without new products
With new products
Return on assets
= (Net Income/Total Assets)*100
= ($495,800/$5,908,200)*100
= 8.39%
(Net Income/Total Assets)*100
=($897,800/$13,540,800 )*100
=6.63%
Profit margin
= (Net Income/Sales) * 100
= ($495,800/$11909300)*100
= 4.16%
= (Net Income/Sales) * 100
=($897,800/$16,483,300)*100
=5.45%
Asset turnover
= Sales / Avg Total Assets
=$11909300/$5,908,200
=2.01 Times
= Sales / Avg Total Assets
= $16,483,300/$13,540,800
= 1.22 Times
Without new products
With new products
Return on assets
= (Net Income/Total Assets)*100
= ($495,800/$5,908,200)*100
= 8.39%
(Net Income/Total Assets)*100
=($897,800/$13,540,800 )*100
=6.63%
Profit margin
= (Net Income/Sales) * 100
= ($495,800/$11909300)*100
= 4.16%
= (Net Income/Sales) * 100
=($897,800/$16,483,300)*100
=5.45%
Asset turnover
= Sales / Avg Total Assets
=$11909300/$5,908,200
=2.01 Times
= Sales / Avg Total Assets
= $16,483,300/$13,540,800
= 1.22 Times
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