Some recent financial statements for Smolira Golf, Inc., follow SMOLIRA GOLF, IN

Question

Some recent financial statements for Smolira Golf, Inc., follow SMOLIRA GOLF, INC. Balance Sheets as of December 31, 2015 and 2016 2015 2016 2015 2016 Assets Liabilities and Owners' Equity Current assets Current liabilities Cash Accounts receivable Inventory $ 2,791 2,607 5,641 13,642 $20,246 21,890 Accounts payable Notes payable Other $ 2,223 2,740 2,256 121 $4,147 5,117 $14,700 17,460 4,697 12,758 1,820 104 Total Total Long-term debt Owners' equity Common stock and paid-in surplus Accumulated retained earnings $45,000 S 45,000 40,134 $60,724 S 85,134 $79,571 $107,711 Fixed assets 15,724 Net plant and equipment Total assets $59,325 85,821 $79,571 $107,711 iabilities and owners' equity Total SMOLIRA GOLF, INC 2016 Income Statement Sales Cost of goods sold Depreciation EBIT Interest paid Taxable income Taxes Net income $190,170 127,603 5,193 $ 57,374 1,290 $ 56,084 19,629 $ 36,455 Dividends Retained earnings $12,045 24,410 Construct the DuPont identity for Smolira Golf. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter the profit margin and return on equity as a percent.) Profit margin Total asset turnover Equity multiplier Return on equity 19.17 % imes times

Explanation / Answer

Profit Margin = Net Income / Sales
Profit Margin = $36,455 / $190,170
Profit Margin = 19.17%

Total Asset Turnover = Sales / Total Assets
Total Asset Turnover = $190,170 / $107,711
Total Asset Turnover = 1.77

Equity Multiplier = Total Assets / Total Owner’s Equity
Equity Multiplier = $107,711 / $85,134
Equity Multiplier = 1.27

Return on Equity = Profit Margin * Total Asset Turnover * Equity Multiplier
Return on Equity = 19.17% * 1.77 * 1.27
Return on Equity = 43.09%

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