In 2015, Jake\'s Jamming Music, Inc., announced an ROA of 8.49 percent, ROE of 1

Question

In 2015, Jake's Jamming Music, Inc., announced an ROA of 8.49 percent, ROE of 13.80 percent, and profit margin of 10.3 percent. The firm had total assets of $8.8 million at year-end 2015.

Calculate the 2015 value of net income available to common stockholders for Jake’s Jamming Music, Inc. (Enter your answers in dollars not in millions and round to the nearest whole dollar.)

Calculate the 2015 value of common stockholders’ equity for Jake’s Jamming Music, Inc. (Round your answer to the nearest dollar amount.)

Calculate the 2015 value of net sales for Jake’s Jamming Music, Inc. (Round your answer to the nearest dollar amount.)

Calculate the 2015 value of net income available to common stockholders for Jake’s Jamming Music, Inc. (Enter your answers in dollars not in millions and round to the nearest whole dollar.)

Explanation / Answer

1.

Return on assets (ROA) = Net income/Total assets

Net Income = Total assets * ROA = $8.8 million * 9.49% = $747,120

2.

Return on equity (ROE) = Net income / Stockholder’s equity

Stockholder’s equity = Net income/ROE = $747,120/0.1380 = $5,413,913

3.

Profit margin = Net income/Net sales

Net sales = Net income/Profit margin = $747,120/0.103 = $7,253,592

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