Question

Crane Company reports the following information (in millions) during a recent year: net sales, $10,700.0; net earnings, $365.0; total assets, ending, $4,155.0; and total assets, beginning, $4,340.0.
(a) Calculate the
(1) return on assets,
(2) asset turnover, and
(3) profit margin.
(Round answers to 1 decimal place, e.g. 6.2% and 6.2.) 1. Return on assets enter the return on assets in percentages rounded to 1 decimal places % 2. Asset turnover enter the asset turnover rounded to 1 decimal places times 3. Profit margin enter the profit margin in percentages rounded to 1 decimal places %

Answer 1

Answer:

(a)

(1) return on assets = 8.6%

(2) asset turnover = 2.5 times

(3) profit margin = 3.45%

Explanation:

Given

Net sales = $10,700.0

Net earnings = $365.0

Total assets, ending = $4,155.0

total assets, beginning = $4,340.0

(a)

(1) Return on assets = net income/average total assets

                                 = 365/((4155 + 4340)/2)

                                 = 365/(8495/2)

                                 = 730/8495

                                 = 0.0859

                                 ≈ 0.086 ≈ 8.6% (rounded to 1 decimal place)

(2) Asset turnover = net revenue/average total assets

                              = 10700/((4155 + 4340)/2)

                                 = 10700/(8495/2)

                                 = 21400/8495

                                 = 2.5 times (rounded to 1 decimal place)

(3) Profit margin = net earning/net sales

                         = 365/10700

                         = 0.034 ≈ 3.45% (rounded to 1 decimal place)