Question

The 2017 Annual Report of Tootsie Roll Industries contains the following information. (in millions) December 31, 2017 December 31, 2016 Total assets $930.9 $920.1 Total liabilities 197.1 208.6 Net sales 515.7 517.4 Net income 80.7 67.2 Compute the following ratios for Tootsie Roll for 2017. (a) Asset turnover (Round answer to 3 decimal places, e.g. 0.851 times.) enter the asset turnover rounded to 4 decimal places times (b) Return on assets (Round answer to 2 decimal places, e.g. 4.87%.) enter the return on assets in percentages rounded to 2 decimal places % (c) Profit margin on sales (Round answer to 2 decimal place

Answer 1

a. 0.557 times

b. 8.72%

c. 0.16

Step-by-step explanation:

a. Asset turnover = Net sales ÷ Average total assets

We will calculate the average total asset first

Average total asset = [Beginning total assets - ending total assets)] / 2

= [(930.9 + 920.1)] / 2

= 925.5

Asset turnover = 515.7/925.5

= 0.557 times

b. Return on assets = Net income/Average total assets

= 80.7/925.5

= 0.087196

= 0.087196 × 100

= 8.72%

c. Profit margin on sales = Net income/Net sales

= 80.7/515.7

= 0.16