Question

The following information was available for the year ended December 31, 2016

Sales $260,000
Net income 38,340
Average total assets 560,000
Average total stockholders' equity 315,000
Dividends per share 1.23
Earnings per share 3.00
Market price per share at year-end 24.60

Required:
a. Calculate margin, turnover, and ROl for the year ended December 31, 2016.
b. Calculate ROE for the year ended December 31, 2016.

Answer 1

A. Margin 14.75%

Turnover 0.46 times

ROI 6.85%

B. ROE 12.17%

Step-by-step explanation:

A. Calculation to determine the margin, turnover, and ROl for the year ended December 31, 2016.

Calculation for MARGIN

Using this formula

Margin=Net income/Sales

Let plug in the formula

Margin=$38,340/$260,000

Margin=0.1475*100

Margin=14.75%

Calculation for TURNOVER

Using this formula

Turnover=Sales /Average total assets

Let plug in the formula

Turnover=$260,000/$560,000

Turnover=0.46 times

Calculation for ROI

Using this formula

ROI=Net income/Average total assets

Let plug in the formula

ROI=$38,340/$560,000

ROI=0.0685*100

ROI=6.85%

Therefore the margin is 14.75%, turnover is 0.46 times and ROl is 6.85% for the year ended December 31, 2016.

B. Calculation to determine the ROE for the year ended December 31, 2016.

Using this formula

ROE=Net income /Average total stockholders' equity

Let plug in the formula

ROE=$38,340/$315,000

ROE=0.1217*100

ROE=12.17%

Therefore the ROE for the year ended December 31, 2016 is 12.17%