# Required Calculate the following ratios for 2018. 2018 Income Statement Sales $8,900 Cost of... ## Question: Financial statements for Askew Industries for 2018 are show below in ($000s)

2018 Income Statement
Sales $8,900 Cost of goods sold (6,275) Gross profit 2,625 Operating expenses (1,975) Interest expense (190) Tax expense (184) Net Income$276

Comparative Balane Sheets
Dec. 31
2018 2017
Assets
Cash $590$490
Accounts receivable $590$490
Inventory 790 590
Property, plant, and equipment (net) 1,900 2,000
$3,870$3,470
Liabilities and Shareholders Equity
Current Liabilities $1,040$790
Bonds payable 1,350 1,350
Paid-in capital 590 590
Retained earnings 890 740
$3,870$3,470

Required: Calculate the following ratios for 2018. Complete the table below.

1. Inventory turnover ratio 9.09
2. Average days in inventory 40.13 days
3. Receivables turnover ratio 18.16
4. Average collection period 20.09 days
5. Asset turnover ratio 2.42
6. Profit margin on sales 3.10%
7. Return on assets 7.52%
8. Return on shareholders' equity _______%
9. Equity multiplier 2.61 times
10. Return on shareholders equity (using the DuPont framework) _______%

## Return on equity:

Return on equity (ROE) can be calculated using the following 2 formulas. ROE = Net income / Stockholder's equity shows how effective management is in using the assets to generate profits. The second formula is known as the Dupont Framework which includes the components of profit margin x total asset turnover x leverage factor. The formula can be broken down as follows: ROE = (Net income / Revenues) x (Revenues / Total assets) x (Total assets / Stockholder's equity).