Pee-Built Problems + Chapter 03 Pre-Buit Problems 6 Some recent financial statem

Question

Pee-Built Problems + Chapter 03 Pre-Buit Problems 6 Some recent financial statements for Smolira Golf Corp. follow 10 cis SMOLIRA GOLF CORP 2017 and 2018 Balance Sheets Liabilities and Owners Equity 2017 Current assets Current liablities s 23.284 27200 1 15.900 s 46,955 54,000 s 90000 93294 Common stock and paidn s 42000 42000 Acciumctated retained 208 936 242706 Cash Accounts s 24056 s 24200 Accounts payable 12 54815300 2559227200Other 62796S 66.700Tota Notes payable 12.000 10.900 11,671 Total Long-term debt Owners equity Fund assets Nei plant and equpment $250936284706 Total assets 5432.000 387891432.000

Explanation / Answer

Profit margin = Net Income / Sales = 54770 / 336329 = 16.28%

Total Asset Turnover = Sales / Avg.Total Assets = 336329 / (387891 + 432000)/2

= 336329 / 409946 = 0.82

Equity Multiplier = Total Assets / Stockholders equity = 432000 / 284706 = 1.52 times

Return on equity = Profit Margin x Total Assets Turnover x Financial Leverage

ROE = (Net income / sales ) x (Sales / Total Assets ) x (Total Assets / Avg.Shareholders Eq.)

ROE = (Net income / Avg.Shareholders Eq.)

        = 54770 / (250936 + 284706)/2 = 54770/267821 = 20.45%

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