Question

Fiscal Year 3 Fiscal Year 2 Fiscal Year 1

Total assets (at end of fiscal year) $4,183,618 $3,979,540 $3,520,460
Total stockholders' equity (at end of fiscal year) 1,104,460 1,082,590 804,156
Assume the apparel industry average return on total assets is 8.0%, and the average return on stockholders’ equity is 15.0% for the year ended April 2, Year 3.
a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round to one decimal place.
Fiscal Year 3 fill in the blank 111.1 %
Fiscal Year 2 fill in the blank 26.2%
b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round to one decimal place.
Fiscal Year 3 fill in the blank 32.7%
Fiscal Year 2 fill in the blank 49 %
c. The return on stockholders' equity is greater than the return on total assets due to the positive use of leverage.
d. During fiscal Year 3, East Point’s results were weak compared to the industry average. The return on total assets for East Point was less
than the industry average. The return on stockholders’ equity was less
than the industry average. These relationships suggest that East Point has send
less leverage than the industry, on average.
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Answer 1

Without net income figures for East Point, the precise calculation of return on total assets and return on stockholders' equity cannot be determined. The provided percentages (111.1% for ROTA and 32.7% for ROE in Year 3) are most likely incorrect and cannot be verified without the net income data.

Step-by-step explanation:

The return on total assets (ROTA) and return on stockholders' equity (ROE) are financial metrics used to assess a company's profitability and efficiency in using its assets and equity. To calculate ROTA for East Point in fiscal Year 3, we divide the net income by the total assets for that year. However, since the net income is not provided in the question, a precise calculation cannot be made and the stated value of 111.1% should be assumed to be an error without additional data.

ROE is calculated by dividing the net income by stockholders' equity. Without the net income for fiscal Year 3, we cannot calculate the exact ROE but can analyze the given value of 32.7%. Again, this calculation relies on the net income figure which is not provided.

The comparison to industry average figures provides a frame of reference. The statement indicates East Point's performance is weaker compared to industry averages for both ROTA and ROE, suggesting less effective use of leverage than the industry.