The income statement for Stretch-Tape Corporation reports net sales of $540,000 and net income of $65,700. Average total assets for the year are $900,000. Stockholders' equity at the beginning of the year was $600,000, and $30,000 was paid to stockholders as dividends during the year. There were no other stockholders' equity transactions that occurred during the year. Required:Calculate the return on assets, profit margin, asset turnover, and return on equity ratios.

Question

Business

Selah Casey

9 October, 00:49

The income statement for Stretch-Tape Corporation reports net sales of $540,000 and net income of $65,700. Average total assets for the year are $900,000. Stockholders' equity at the beginning of the year was $600,000, and $30,000 was paid to stockholders as dividends during the year. There were no other stockholders' equity transactions that occurred during the year. Required:Calculate the return on assets, profit margin, asset turnover, and return on equity ratios.

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Antonio Holmes · Answer 1

7.3%; 12.17%; 0.6 times; 15.95%

Explanation:

Return on assets:

= Net Income : Average total assets

= ($65,700 : $900,000) * 100

= 7.3%

Profit Margin:

= Net Income : Net Sales

= ($65,700 : $540,000) * 100

= 12.17%

Asset Turnover:

= Net Sales : Average Total Assets

= $540,000 : $900,000

= 0.6 times

Return on Equity:

= Net Income before dividend : Equity

= [ ($65,700 + $30,000) : $600,000] * 100

= ($95,700 : $600,000] * 100

= 15.95%