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Consider the following company’s balance sheet and income statement Return on assets. Return on equity

Consider the following company’s balance sheet and income statement Return on assets. Return on equity

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Consider the following company’s balance sheet and income statement

  1. Return on assets.

  2. Return on equity.

### Balance Sheet **Assets** - **Cash**: $4,000 - **Accounts Receivable**: $52,000 - **Inventory**: $40,000 **Total Current Assets**: $96,000 - **Fixed Assets**: $44,000 **Total Assets**: $140,000 **Liabilities and Equity** - **Accounts Payable**: $30,000 - **Notes Payable**: $12,000 **Total Current Liabilities**: $42,000 - **Long-term Debt**: $36,000 **Equity**: $62,000 **Total Liabilities and Equity**: $140,000 ### Income Statement - **Sales (all on credit)**: $200,000 - **Cost of Goods Sold**: $130,000 **Gross Margin**: $70,000 - **Selling and Administrative Expenses**: $20,000 - **Depreciation**: $8,000 **EBIT (Earnings Before Interest and Taxes)**: $42,000 - **Interest Expense**: $4,800 **Earnings Before Tax**: $37,200 - **Taxes**: $11,160 **Net Income**: $26,040 ### Explanation This document features a balance sheet and an income statement. - **Balance Sheet**: Displays company assets, liabilities, and equity, ensuring total assets equal total liabilities and equity. It highlights cash, accounts receivable, inventory, and fixed assets under assets, while accounts payable, notes payable, and long-term debt are listed under liabilities. - **Income Statement**: Shows financial performance over a period, listing sales, cost of goods sold, and additional expenses. It calculates gross margin, EBIT, and net income, providing insights into profitability after all expenses and taxes.
Transcribed Image Text:### Balance Sheet **Assets** - **Cash**: $4,000 - **Accounts Receivable**: $52,000 - **Inventory**: $40,000 **Total Current Assets**: $96,000 - **Fixed Assets**: $44,000 **Total Assets**: $140,000 **Liabilities and Equity** - **Accounts Payable**: $30,000 - **Notes Payable**: $12,000 **Total Current Liabilities**: $42,000 - **Long-term Debt**: $36,000 **Equity**: $62,000 **Total Liabilities and Equity**: $140,000 ### Income Statement - **Sales (all on credit)**: $200,000 - **Cost of Goods Sold**: $130,000 **Gross Margin**: $70,000 - **Selling and Administrative Expenses**: $20,000 - **Depreciation**: $8,000 **EBIT (Earnings Before Interest and Taxes)**: $42,000 - **Interest Expense**: $4,800 **Earnings Before Tax**: $37,200 - **Taxes**: $11,160 **Net Income**: $26,040 ### Explanation This document features a balance sheet and an income statement. - **Balance Sheet**: Displays company assets, liabilities, and equity, ensuring total assets equal total liabilities and equity. It highlights cash, accounts receivable, inventory, and fixed assets under assets, while accounts payable, notes payable, and long-term debt are listed under liabilities. - **Income Statement**: Shows financial performance over a period, listing sales, cost of goods sold, and additional expenses. It calculates gross margin, EBIT, and net income, providing insights into profitability after all expenses and taxes.
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