Question

Simon Company's year-end balance sheets follow.

Answer 1

Answer:

1.  2014 = 11 % and 2013 = 15 %

2. 2014 = 1.30 times and 2013 = 1.41 times

3. 2014 = 14.27 % and 2013 = 21.16 %

Explanation:

1.  Profit margin ratio

Profit margin ratio  = Earnings Before Interest and Tax / Sales × 100

Therefore,

Profit margin ratio  (2014) = ($ 52.400 + $ 9,550 + $12,300) / $675,000 × 100

                                         = 11 %

Profit margin ratio  (2013) = $ 72,575 + $ 8,925 + $13,000) / $630,000 × 100

                                         = 15 %

2. Total Asset turnover.

Total Asset turnover = Sales ÷ Total Assets

Therefore,

Total Asset turnover (2014) = $675,000 ÷  $ 520,500

                                             = 1.30 times

Total Asset turnover (2013) = $630,000 ÷ $446,550

                                             = 1.41 times

3. Return on total asset

Return on total asset = Earnings Before Interest and Tax (EBIT) / Total Assets × 100

Therefore,

Return on total asset (2014) = $ 52.400 + $12,300 + $9,550 / $ 520,500 × 100

                                              = 14.27 %

Return on total asset (2013) = $ 72,575 + $8,925 + $13,000 / $446,550 × 100

                                              = 21.16 %