Hello, can you please help with the below. Please include step by step work and

Question

Hello, can you please help with the below. Please include step by step work and include part B with detailed explanation

Following are selected data from year-end financial statements of Lima Corporation for 2017-2016

a.Compute the following performance measurements ratios for 2017 (ignore income taxes)

b) is Lima Company using financial leverage? if so, is the leverage favorable or unfavorable? Explain

2017 2016 Total assets $ 4,420,000.00 $    393,000.00 Interest expense $69,000 $61,000 Long-term liabilities $832,000 $845,000 Net income $452,875 $411,900 sales $5,218,750 $4,454,700 Stockholder equity $2,428,750 $2,100,000

Explanation / Answer

1.Asset turnover = Net Sales / Average Total Assets = $5,218,750 / 2,406,500 = 2.168

Average Total Assets= Beginning Total Assets + Ending Total Assets / 2

= 393,000 + 4,420,000 / 2 = 2,406,500

2.Return on sales = Operating Profit / Net Sales =   $521,875 / $5,218,750 = 0.1

Operating Profit = Net Income + Interest Expense = $452,875 + $69,000 = $521,875

3.Return on Assets = Net Income / Average total Assets = $452,875 / 2,406,500 = 0.188

4.Return on equity = Net Income/ Shareholder's Equity = $452,875 /$2,428,750 = 0.186

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.