Question

Excerpts from Dowling Company's December 31, 2018 and 2017, financial statements and key ratios are presented below (all numbers are in millions):2018 2017Accounts receivable (net) $ 20 $ 16Net sales $ 115 100Cost of goods sold $ 60 55Net income $ 20 17Inventory turnover 5.22Return on assets 10.3 %Equity Multiple 2.36Dowling's return on equity for 2018 is (rounded):(A) 24.3%. (B) 22%.(C) 17.4%.(D) 9%.

Answer 1

Answer:

Option (A) is correct.

Explanation:

Given that,

2018:

Accounts receivable (net) = $20

Net sales = $115

Cost of goods sold = $60

Net income = $20

Inventory turnover = 5.22

Return on equity = Return on assets × Equity multiple

                             = 10.3% × 2.36

                             = 24.308% or 24.3%

Therefore, Dowling's return on equity for 2018 is 24.3%.