Use the below information to answer the following question. Income Statement For

Question

Use the below information to answer the following question. Income Statement For the Year Net sales $631,000 COGS 442,220 Depreciation 28,100 EBIT $160,700 Interest 14,900 Taxable income $145,800 Taxes 49,600 Net income $96,200 Balance Sheet Beginning of Year End of Year Cash $ 38,200 $43,700 Accounts receivable 91,400 86,150 Inventory 203,900 214,600 Net fixed assets 516,100 537,950 Total assets $849,600 $882,400 Accounts payable $136,100 $104,300 Long-term debt 329,500 298,200 Common stock ($1 par value) 75,000 82,000 Retained earnings 309,000 397,900 Total Liab. & Equity $849,600 $882,400 What is the return on equity using year-end values? 15.38 percent 24.26 percent 19.96 percent 20.05 percent 25.05 percent

Explanation / Answer

Calculation of Shareholder's equity Beg of year End of year Cash 38200 43700 AR 91400 86150 Inventory 203900 214600 FA (net) 516100 537950 Total Assets (1) 849600 882400 Less: Accounts payable 136100 104300 Long term debt 329500 298200 Total liabilities (2) 465600 402500 Shareholder's Equity (1-2) 384000 479900 Calculation of ROE 20.04 Net Income/Shareholder's equity *100 Tip for student: Shareholder's equity can be calculated by summing up the retained earnings and common stock value as well Common stock 75000 82000 Retained earnings 309000 397900 384000 479900

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