Answer:
The question is incomplete, the completed question is as follows:
The following condensed information was reported by Peabody Toys, Inc., for 2021 and 2020: ($ in thousands)
2021 2020
($ in thousands)
Income Statement
Net sales 6400 5400
Net income 406 148
Balance Sheet
Current assets 920 870
Property plant and equipment(net) 2180 1830
Total Assets 3100 2700
Current liabilities 1500 1210
Long term Liabilities 870 870
Common Stock 400 400
Retained Earnings 330 220
Liabilities and Shareholders Equity 3100 2700
Required:
1. Determine the following ratios for 2021:
(1) profit margin on sales, (2) return on assets, (3) return on shareholders equity (Round your percentage answers to 1 decimal place.)
2. Determine the amount of dividends paid to shareholders during 2021. (Enter your answer in dollars.)
Profit margin on sales = 6.3%
Return on assets = 13.1%
Return on shareholders equity = 60.2%
Dividends paid = $296, 000
Explanation:
Profit margin is the fraction of net income retained from sales revenue less operational costs. It is calculated as: Net income/ Sales * 100. The profit margin for Peabody in 2021 is: ($406, 000/ $6400000)*100 = 6.34375 %
Return on assets is the income generated by working assets. It is a profitability ratio that depicts the efficiency of management in creating value from the business assets. It is computed as: Net income/Total assets at the end of the period * 100. The ROA for Peabody in 2021 is: ($406, 000/$3,100,000) * 100 = 13.09677%
Return on shareholder's equity is the profit generated from investments made by shareholders. This ratio can be used to compare the competitiveness of a company with that of its competitors in the industry or the industry average. It is calculated as: Net income/Average Shareholders Equity * 100. The average Shareholder's equity is calculated by adding beginning and ending balances of shareholders equity and dividing the amount by 2. The ROE for Peabody in 2021 is: ($406, 000/$675, 000)*100 = 60.14815%. $675, 000 = ($730, 000 + $620,000)/2
Dividends are tokens paid to shareholders as a result of their investment in the firm's equity. It is obtained from the resulting net income from operations. The dividends paid out by Peabody in 2021 are calculated as a balancing figure in the retained earnings account:
Opening balance: Retained Earnings $220, 000
Net income: $406, 000
Dividends paid: ($296, 000)
Closing balance: Retained Earnings $330, 000
