Lymen International is considering a significant expansion to its product line.

Question

Lymen International is considering a significant expansion to its product line. The sales force is excited about the opportunities that the new products will bring. The new products are a significant step up in quality above the company's current offerings, but offer a complementary fit to its existing product line. Fred Riddick, senior production department manager, is very excited about the high-tech new equipment that will have to be acquired to produce the new products. Barbara Dyson, the company's CFO, has provided the following projections based on results with and without the new products Without New Products With New ProductsS $11,686,200 $486,300 $5,917,600 $16,263,600 Sales revenue Net income Average total assets $878,400 $13,539,700 (a Compute the company's return on assets, profit margin, and asset turnover, both wth and without the new product in Rot answers d cima Pa es, e.g. 2% and asset turnover to 1 decimal place, eg. 6.2) Without new products With new products 9% Return on assets Profit margin Asset turnover

Explanation / Answer

Computation of ratios Return on assets = Net Income / Average total assets Without new products With new products Net Income $486,300.00 $878,400.00 / Average Total assets $5,917,600.00 $13,539,700.00 Return on assets    8.22% 6.49% Profit Margin = Net Income / Sales Revenue Without new products With new products Net Income $486,300.00 $878,400.00 / Sales Revenue $11,686,200.00 $16,263,600.00 Profit Margin   4.16% 5.40% Asset turnover ratio = Sales Revenue / Average Total assets Without new products With new products Sales Revenue $11,686,200.00 $16,263,600.00 / Average Total assets $5,917,600.00 $13,539,700.00 Asset turnover ratio                      1.97                       1.20

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