Question

The 2021 income statement for Anderson TV and Appliance reported net sales of $260,000 and net income of $75,000. Average total assets for 2021 was $500,000. Shareholders’ equity at the beginning of the year was $400,000 and $30,000 was paid to shareholders as dividends. There were no other shareholders’ equity transactions that occurred during the year. Calculate the profit margin on sales, return on assets, and return on equity for 2021

Answer 1

Answer:

profit maring: 28.84%

ROA 15%

ROE 17.75%

Explanation:

profit margin:

$\frac{income}{sales}$

75,000 / 260,00 = 0,28846 = 28.84%

return on assets ROA

$\frac{income}{assets}$

75,000 / 500,000 = 0.15

return on equity: ROE

$\frac{income}{equity}$

average equity:

ending= beginning + income - dividends

400,000 + 75,000 - 30,000 = 445,000

(400,000 + 445,000) / 2  = 422,500

75,000 / 422,500 = 0,17751 = 17.75%