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).
Answer and Explanation: 1
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View this answerRequired: Calculate the following ratios for 2018. Complete the table below.
| 1. | Inventory turnover ratio | 9.09 |
|---|---|---|
| 2. | ...
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Chapter 2 / Lesson 8Discover what the DuPont analysis in finance is. Review its importance and uses. Explore its model and formulas, and learn how to calculate it through examples.