The following information is from the 2017 annual report of Weber Corporation, a
ID: 2554991 • Letter: T
Question
The following information is from the 2017 annual report of Weber Corporation, a company that supplies manufactured parts to the household appliance industry.
Required:
Compute Weber Corporation’s return on assets (ROA) for 2017 using a combined federal and state income tax rate of 40% where needed.
Compute the profit margin and asset turnover components of ROA for 2017.
Weber’s management believes that various business initiatives will produce an asset turnover rate of 2.25 next year. If the profit margin next year is unchanged from 2017, what will be the company’s ROA?
(Do not round your intermediate calculations. Round your final answers to 2 decimal places.)
Average total assets $ 24,500,000 Average interest-bearing debt 10,000,000 Average other liabilities 2,250,000 Average shareholders' equity 12,250,000 Sales 49,000,000 Interest expense 800,000 Net income 2,450,000Explanation / Answer
Calculation of return on assets for 2017: Return on assets= Net income after tax/ average total assets*100 Net income after tax=2450000*0.60=$1470000 Return on assets= 1470000/24500000*100= 6% Profit margin= Net income after tax/ sales*100 =1470000/49000000*100=3% Profit margin=3% Asset turnover ratio= Net sales/ average total assets =49000000/24500000= 2 When assets turnover rate is 2.25 then sales=2.25*24500000= $55125000 Net income after tax=55125000*0.03= $1653750 Return on assets= 1653750/24500000*100=6.75%
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