The following table gives abbreviated balance sheets and income statements for E

Question

The following table gives abbreviated balance sheets and income statements for Estée Lauder Companies Assume a corporate tax rate of 33.57%. $ in millions) End of Year Start of Year Balance Sheet Assets Current assets: Cash and marketable securities Accounts receivable Inventories Other current assets $1,363 936 1,007 503 $1,132 757 838 439 Total current assets Fixed assets: Tangible fixed assets Property. plant, and equipment Less accumulated depreciation 3,809 3.166 2,873 1.721 2,536 1,502 Net fixed assets Other long-term assets 1,152 1.455 1,034 1,202 Total assets $6.416 $5,402 Liabilities and Shareholders' Equity Current liabilities: Debt due for repayment Accounts payable $ 149 1,816 S 34 1,560 Total current liabilities Long-term debt Other long-term liabilities 1,965 1,091 632 1,594 1,216 621 Total liabilities Total shareholders' equity 3,688 2,728 3,431 1,971 Total liabilities and shareholders' equity $6,416 $5,402 Income Statement Net sales Cost of goods sold Selling. general, and administrative expenses $8,821 1,948 5,497 309

Explanation / Answer

Return on assets = Net Income / Average total assets

Average total assets =[ Begiining value of total assets + End value of total assets ] / 2

=[ $6416 +$ 5402 ] / 2 =$5909

Net Income = $659

ROA = $659 / $5909 = 11.15%

Operating Profit Margin =[ Operating Profit / Net Sales ] * 100

Operating Profit or Earning Before Interests And Taxes (EBIT) = $1067 (given) ,Net sales = $8821

Operating Profit Margin = [ 1067 / 8821 ] * 100 = 12.09%

Sales to assets ratio = Net Sales / Average Totoal assets

Net sales = $8821 , Average total assets = $5909 (calculated above)

Sales to assets ratio = $8821 / $5909 = 1.492

Inventory turnover ratio = Cost of goods sold / average inventory

Cost of goods sold = $1948 , Average Inventory =[ $1007 + 838 ] / 2 = 922.5

Inventory turnover ratio = $1948 / $922.5 = 2.12

Debt Equity Ratio = Total Debt / Total Equity

Total liabilities or debt = $3688 , Total equity = 2728

Debt equity ratio = 3688 / 2728 =1.35

Current ratio = Current Assets / Current Liabilities

Crrent assets = $3809 , Current Liabilities = $1965

Current ratio = 3809 / 1965 = 1.94

Quick ratio =[ Cash And Marketable Securities + Accounts Recievable ] / Current Liabilities

=[ $1363 +$936 ] / $1965 = 1.18

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