for Smolira Golf, Inc., follow. as of December 31 2014 2013 and 2014 2013 2013 L
ID: 2811497 • Letter: F
Question
for Smolira Golf, Inc., follow. as of December 31 2014 2013 and 2014 2013 2013 Liabilities and Owners' Equity 2014 Assets Current assets s 3,413 3,846 3.416 165 Cash $ 4,607 4,910 Accounts payable 6,702 8,149 Notes payable Inventory 17,357 19,350 Other 138 $28,666 32,409 Total $ 6,319 $ 7427 $22,500 $ 19,000 Long-term debt Owners equity stock and paid-in surplus Accumulated retained eamings $38,000 $ 38,000 20,535 44,792 Fixed assets Net plant and equipment 58,688 $ 76,810 Total Total assets $58,535 s 82,792 $87.354 $109,219 Total iabilities and owners' equity $87,354 $ $87,354 S 109,219 $ 205,227 138,383 5,910 Cost of goods sold EBIT Interest paid S 60,934 1,617 $ 59,317 20,760 Taxes Net income Dividends $ 38,557 S 14,300 24,257Explanation / Answer
Profit Margin
18.79%
Total Asset Turnover
2.09 Times
Equity Multiplier
1.32 Times
Return on Equity
51.84%
Calculations
Profit Margin
Profit Margin = [Net Income / Sales] x 100
= [$38,557 /2,05,227] x 100
= 18.79%
Total Asset Turnover
Total asset turnover = Sales / Total Assets
= $205,227 / [(87,354 + 109,219)/2
= $205,227 / 98,286.50
= 2.09 Times
Equity Multiplier
Equity multiplier = 1 + Debt-equity ratio
Debt-equity ratio = Total debt / Total equity
= [$7,427 + 19,000] / 82,792
= $26,427 / 82,792
= 0.32
Therefore, Equity Multiplier = 1 + 0.32 = 1.32 Times
Return on Equity
Return on Equity = Profit Margin x Total Asset Turnover x Equity Multiplier
= 18.79% x 2.09 Times x 1.32 Times
= 51.84%
Profit Margin
18.79%
Total Asset Turnover
2.09 Times
Equity Multiplier
1.32 Times
Return on Equity
51.84%
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