MA-17.Measures of Performance and Financial Leverage Following are selected data

Question

MA-17.Measures of Performance and Financial Leverage Following are selected data from year end financial statements of Lima Corporation for 2017 and 2016. 2017 2016 Total assets' ir i. TE ti H H t :: -TEH i Interest expense. E E E-- Ht leu Long-term liabilities Net income Sales Stockholders equity g E E a i $4.420 000 33.930,000 etilt . : : . . 69.000 i 1361.0007 832.000 452 875T 0845 000 411 900 5218.750454 700 24287502100.000 Required a. Compute the following performance nmeasurement ratios tor bo17. denore incone TRx es) I Asset tumover 2.1 Remmon sales Retum on assets Return on equity 1 4, b. Is Lima Conpany usng inancial leverage! It so is the leverage lavorable or antsoabie Explau

Explanation / Answer

a Asset Turn Over Net Sales / Average Total Assets 5218750 / (4420000 + 3930000)/2 = 1.25 times b Return on Sales Net Income / Sales 452875 / 5218750 8.68% c Return On Assets Net Income / Total Assets 452875 / 4420000 10.25% d Return on equity Net Income / Stock holders equity 452875 / 2528750 17.91%

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