How to get following answers right using equations and calculator (no excel) 12.

Question

How to get following answers right using equations and calculator (no excel)

12. If a firm's net profit margin is 5%, its total asset turnover is 1.5 times, and its debt ratio is 20%, its return on equity is:

7.14%

9.38%

10.71%

12.50%

15.00%

14. Various items from the Perril Company's Income statement for the year ending December 31, 2005 are listed below:

Interest expense = 93
Depreciation = 76
Taxes = 46
Dividends paid = 15
Beginning inventory = 110
Gross sales = 990
Materials purchases = 532
Operating expenses (excluding depreciation) = 249
Returns and allowances = 58
Ending inventory = 238

Compute Net income (Record your answer without a dollar sign, without commas, without spaces and if your answer is negative, put a minus sign (i.e., -) before your answer with no spaces between the minus sign and the number).

Answer:

7.14%

9.38%

10.71%

12.50%

15.00%

14. Various items from the Perril Company's Income statement for the year ending December 31, 2005 are listed below:

Interest expense = 93
Depreciation = 76
Taxes = 46
Dividends paid = 15
Beginning inventory = 110
Gross sales = 990
Materials purchases = 532
Operating expenses (excluding depreciation) = 249
Returns and allowances = 58
Ending inventory = 238

Compute Net income (Record your answer without a dollar sign, without commas, without spaces and if your answer is negative, put a minus sign (i.e., -) before your answer with no spaces between the minus sign and the number).

Answer:

Explanation / Answer

         12 Net Profit margin =Net Income/Sales =5% Total Asset Turnover =Sales /Total Asset=1.5 Debt Ratio=Debt/Total Asset=20% ROE =Net income/Equity Net Income /Sales *Sales /Assets=5%*1.5 Net Income/Total Assets=7.5% Debt /Asset =20% Equity /Assets= (1-20%)/100%=80% Assets /Equity =100/80 =1.25 So Net Income /Total Assets*Total Assets/Equity= = Net Income /Total Assets=ROE= 7.5%*1.25= 9.38% So ROE =9.38%          14 Net income Calculation Amt $ Gross Sales                         990 Less Return & Allowances                       (58) Net Sales                       932 Cost of Goods sold Opening Inventory                       110 Add Purchase                       532 Less Closing Inventory                     (238) Cost Of Goods sold                       404 Gross Profit                       528 Less Operationg Expenses   Operating Expenses                       249 Depreciation                          76 EBIT                       203 Less Interest expense                          93 EBT                       110 Less Tax                          46 Net Income                          64

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