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Luther Corporation Consolidated Income Statement Year ended December 31 (in $mil

ID: 2656152 • Letter: L

Question

Luther Corporation

                                         Consolidated Income Statement

                                 Year ended December 31 (in $millions)

2006

2005

Total sales

610.1

564.9

Cost of sales

-500.2

-360.5

Gross profit

109.9

204.4

Selling, general, and

administrative expenses

-40.5

-40.5

Research and development

-24.6

-23.5

Depreciation and amortization

-3.6

-3.4

Operating income

41.2

137

Other income

--

--

Earnings before interest and taxes (EBIT)

41.2

137

Interest income (expense)

-25.1

-14.3

Pretax income

16.1

122.7

Taxes

-5.5

-42.945

Net income

10.6

79.755

Price per share

$16

$15

Sharing outstanding (millions)

10.2

8.0

Stock options outstanding (millions)

0.3

0.2

Stockholders' Equity

126.6

63.6

Total Liabilities and Stockholders' Equity

533.1

386.7

Refer to the income statement above. Luther's return on assets (ROA) for the year ending December 31, 2006 is closest to ________.

D) 1.99%

A) 24.32%

B) 6.70%

C) 20.62%

2006

2005

Total sales

610.1

564.9

Cost of sales

-500.2

-360.5

Gross profit

109.9

204.4

Selling, general, and

administrative expenses

-40.5

-40.5

Research and development

-24.6

-23.5

Depreciation and amortization

-3.6

-3.4

Operating income

41.2

137

Other income

--

--

Earnings before interest and taxes (EBIT)

41.2

137

Interest income (expense)

-25.1

-14.3

Pretax income

16.1

122.7

Taxes

-5.5

-42.945

Net income

10.6

79.755

Price per share

$16

$15

Sharing outstanding (millions)

10.2

8.0

Stock options outstanding (millions)

0.3

0.2

Stockholders' Equity

126.6

63.6

Total Liabilities and Stockholders' Equity

533.1

386.7

Explanation / Answer

Return on Assets (ROA) = Net Income / Total Assets

Return on Assets (ROA) = 10.60 / 533.1 .... (Total Assets = Total Liabilities and Stockholders' Equity)

Return on Assets (ROA) = 1.99%

D) 1.99%