Profitability Analysis for Casper Corp. For the year ended September 29, 2012, C

Question

Profitability Analysis for Casper Corp.

For the year ended September 29, 2012, Casper Corporation reported net income of $2,080 million. Total shareholders' equity on this date was $18,208 million, and on September 24, 2011, it was $19,693 million. No preferred stock was outstanding in either year.

Required:

1. Compute Casper's return on common stockholders' equity for the year ended September 29, 2012. Round your answer to two decimal places.
%

2. What other ratio would you want to compute to decide whether Casper is successfully employing leverage?
- Select your answer -Return on stockholders' equityReturn on assetsReturn on salesAsset turnover ratio

Explanation / Answer

1. Return on common shareholders equity = Net income / Average total Shareholders equity = 2080 / ((18208+19693)/2) = 10.98%

2. We have to decide a ratio which is considering liabilities on the balance sheet

Among all the ratios provided in the options, only return on assets will consider total liabilities into account along with the total equity as well.

Since Assets = liabilities + equity

So we choose return on assets

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