Some recent financial statements for Smolira Golf Corp. follow SMOLIRA GOLF CORP

Question

Some recent financial statements for Smolira Golf Corp. follow SMOLIRA GOLF CORP 2017 and 2018 Balance Sheets Assets Liabilities and Owners' Equity 2017 2018 2017 2018 Current assets Current liabilities $ 28,100 11,800 19,100 $ 56,755 59,000 $ 79,000 83,424 Cash Accounts $ 23,046 25,100 16,200 28100 $ 63,316 69,400 $ 24,184 Accounts payable Notes payable Other 13,448 20,000 12,571 receivable Inventory 26,822 Total Total Long-term debt Owners' equity Common stock and paid-in $ 48,000 48,000 surplus Accumulated retained 214,256 243,576 earnings Fixed assets Net plant and $334,695 $364,600 Total $262,256 $291,576 equipment Total liabilities and owners' Total assets 398,011 $434,000 $398,011 $434,000

Explanation / Answer

Total Asset Turnover = Sales / Total Assets = (349760 / 434000) = 0.8056 times

Equity Multiplier = Total Assets / Owner's Equity = (434000 / 291576) = 1.4885 times approximately

Net Profit Margin = Net Profit / Sales = 49320 / 349760 = 0.141 or 14.1 % approximately.

Using DuPont Formula:

ROE = Net Profit / Owner's Equity = (Net Profit / Sales) x (Sales / Total Assets) x (Total Assets / Owner's Equity) = 0.141 x 0.8056 x 1.4885 = 0.1691 or 16.91 % approximately.

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