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uysha [10]
3 years ago
10

Keller Cosmetics maintains an operating profit margin of 7% and asset turnover ratio of 4.

Business
1 answer:
Yanka [14]3 years ago
6 0

Answer:

A) ROA = 28%

B) ROE = 20%

Explanation:

Requirement A

We know,

Return on Asset = \frac{Net Income}{Average Total Assets}

If we break the ROA formula, we can get,

ROA = \frac{Net Income}{Net Sales} × \frac{Net Sales}{Average total assets}

We know, Profit margin = Net Income ÷ Net Sales; and

Asset Turnover ratio = Net sales ÷ Average total assets

Therefore, ROA = Profit margin × Asset Turnover

Given,

Profit Margin = 7% = 0.07

Asset Turnover = 4.0

Hence, Return on Asset = 0.07 × 4 = 0.28 = 28%

It shows how assets generate income over a period.

Requirement B

We know,

Return on Equity = \frac{Net Income}{Stockholders' Equity}

If we break the formula, ROE = (Asset ÷ Equity) × (Debt Burden) × ROA

Given,

Debt-Equity ratio = 1

We know, Debt-equity ratio = \frac{Total Debt}{Total Stockholders' Equity}

As debt-equity ratio is 1, debt = equity

Therefore, assets =  2 times of debt or equity

Debt Burden = Net Income ÷ (EBIT - Interest)

Debt Burden = (EBIT - Interest - Tax) ÷ (EBIT - Interest)

Debt Burden = $(21,000 - 8,200 - 8,200) ÷ $(21,000 - 8,200)

Debt Burden = $4,600 ÷ $12,800

Debt Burden = 0.359375

We have already got ROA from requirement A, ROA = 28% = 0.28

Hence, ROE = (2 ÷ 1) × 0.359375 × 0.28

ROE = 0.20125

ROE = 20%

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Answer:

$835

Explanation:

Calculation for the amount of revenue that Minarski Electronics recognize

First step is to find the Total cost amount if sold separately

Total cost if sold separately = 984+ 216

Total cost if sold separately= 1200

Second step is to find the Percentage of computer

Percentage of Computer = 984/1,200

Percentage of Computer = 0.82

Percentage of Computer =82%

Third step is to find the Percentage of maintenance

Percentage of maintenance = 216/1,200

Percentage of maintenance=0.18*100

Percentage of maintenance=18%

Next step is to calculate for the Revenue to be recognized for both computer and Maintenance service costs

Computer Revenue= 1,000 * 82%

Computer Revenue= 820

Maintenance service costs revenue =(18% * 1,000)/12

Maintenance service costs revenue =180/12

Maintenance service costs revenue =15

Last step is to find the Total amount to be recognized

Total amount to be recognized = 820 + 15

Total amount to be recognized=$835

Therefore the amount of revenue that Minarski Electronics will recognize is $835

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Answer:

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Answer:

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Explanation:

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