Yellow Lizard Incorporated is interested in assessing the following scenarios on

Question

Yellow Lizard Incorporated is interested in assessing the following scenarios on its indicators of profitability. Solve each scenario independently. a. Yellow Lizard has taken significant steps to decrease expenses and expects its net income to increase by $12 million to $68 million. If its profit margin is 10.0%, what will the profit margin be after considering the decreased expenses? b. Yellow Lizard has taken significant steps to decrease expenses and expects its net income to increase by $12 million to $68 million. If its average total assets are $510 million, what will its return on assets be? a. Yellow Lizard has taken significant steps to decrease expenses and expects its net income to increase by $12 million to $68 million. If its profit margin is 10.0%, what will the profit margin be after considering the decreased expenses? Select the formula and then enter the amounts to calculate the profit margin for Yellow Lizard Incorporated. (Enter amounts in millions as provided to you in the problem statement, $XX. Round your final answer to the nearest tenth of a percent, X.X%) Profit margin b. Yellow Lizard has taken significant steps to decrease expenses and expects its net income to increase by $12 million to $68 million. t its average total assets are $510 million, what will its return on assets be? Select the formula and then enter the amounts to calculate the return on assets for Yellow Lizard Incorporated. (Enter amounts in millions as provided to you in the problem statement, $XX. Round your answer to the nearest tenth of a percent, X.X%.) Return on assets

Explanation / Answer

a) Calculation of profit margin: Net income/ Net sales= Profit margin 0.10= (68-12)/ net sales Net sales= 56/0.10= $560 million When expenses increased to $68 million then 68 million/560million*100= 12.1% So 68 million/ 560 million= 12.1% b) Calculation of return on assets: Net income/ average total assets= Return on assets Return on assets= 68 million/510 million*100= 13.3% So 68 million/ 510 million= 13.3%

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