East Point Retail, Inc. sells apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands): Fiscal Year 3 Fiscal Year 2 Net income $149,300 $76,800 Interest expense 3,000 11,500 Fiscal Year 3 Fiscal Year 2 Fiscal Year 1 Total assets (at end of fiscal year) $1,334,252 $1,269,166 $1,117,320 Total stockholders' equity (at end of fiscal year) 1,100,679 1,078,883 794,287 Assume the apparel industry average return on total assets is 5.0% and the average return on stockholders' equity is 8.0% for the year ended February 2, Year 3. a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. Fiscal Year 3 % Fiscal Year 2 % b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. Fiscal Year 3 Fiscal Year 2 % c. The return on stockholders' equity is the return on total assets due to the use of leverage. d. During fiscal Year 3, East Point's results were v compared to the industry average. These relationships suggest that East Point's has leverage than the industry, on average.
East Point Retail, Inc. sells apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands): Fiscal Year 3 Fiscal Year 2 Net income $149,300 $76,800 Interest expense 3,000 11,500 Fiscal Year 3 Fiscal Year 2 Fiscal Year 1 Total assets (at end of fiscal year) $1,334,252 $1,269,166 $1,117,320 Total stockholders' equity (at end of fiscal year) 1,100,679 1,078,883 794,287 Assume the apparel industry average return on total assets is 5.0% and the average return on stockholders' equity is 8.0% for the year ended February 2, Year 3. a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. Fiscal Year 3 % Fiscal Year 2 % b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. Fiscal Year 3 Fiscal Year 2 % c. The return on stockholders' equity is the return on total assets due to the use of leverage. d. During fiscal Year 3, East Point's results were v compared to the industry average. These relationships suggest that East Point's has leverage than the industry, on average.
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
Related questions
Question
Practice Pack

Transcribed Image Text:### Profitability Ratios
East Point Retail, Inc. sells apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands):
| | Fiscal Year 3 | Fiscal Year 2 |
|------------------------|---------------|----------------|
| **Net income** | $149,300 | $76,800 |
| **Interest expense** | $3,000 | $11,500 |
| **Total assets** | | |
| (at end of fiscal year)| $1,334,252 | $1,269,166 |
| **Total stockholders' equity** | | |
| (at end of fiscal year) | $1,100,679 | $1,078,883 |
Assume the apparel industry average **return on total assets** is 5.0% and the average **return on stockholders' equity** is 8.0% for the year ended February 2, Year 3.
### a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round percentages to one decimal place.
| | Fiscal Year 3 | Fiscal Year 2 |
|----------------|---------------|---------------|
| Return on total assets | ____ % | ____ % |
### b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place.
| | Fiscal Year 3 | Fiscal Year 2 |
|---------------------------|---------------|---------------|
| Return on stockholders' equity| ____ % | ____ % |
### c. The return on stockholders' equity is ____ the return on total assets due to the ____ use of leverage.
### d. During fiscal Year 3, East Point’s results were ____ compared to the industry average. These relationships suggest that East Point’s has ____ leverage than the industry, on average.
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Includes step-by-step video
Trending now
This is a popular solution!
Learn your way
Includes step-by-step video
Step by step
Solved in 2 steps with 2 images

Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you

Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,



Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,



Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,

Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education