East Point Retail, Inc., sells professional women's apparel through company-owned retail stores. Recent financial information for East Point is provided below (all numbers in thousands). Fiscal Year 3 Fiscal Year 2 Net income $134,300 $69,200 Interest expense 2,700 10,300 Fiscal Year 3 Fiscal Year 2 Fiscal Year 1 Total assets (at end of fiscal year) $3,600,642 $3,425,000 $2,935,000 Total stockholders' equity (at end of fiscal year) 1,085,144 1,063,656 781,678 Assume the apparel industry average return on total assets is 8.0%, and the average return on stockholders' equity is 15.0% for the year ended April 2, Year 3. a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round 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 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.
East Point Retail, Inc., sells professional women's apparel through company-owned retail stores. Recent financial information for East Point is provided below (all numbers in thousands). Fiscal Year 3 Fiscal Year 2 Net income $134,300 $69,200 Interest expense 2,700 10,300 Fiscal Year 3 Fiscal Year 2 Fiscal Year 1 Total assets (at end of fiscal year) $3,600,642 $3,425,000 $2,935,000 Total stockholders' equity (at end of fiscal year) 1,085,144 1,063,656 781,678 Assume the apparel industry average return on total assets is 8.0%, and the average return on stockholders' equity is 15.0% for the year ended April 2, Year 3. a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round 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 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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![East Point Retail, Inc., sells professional women's apparel through company-owned retail stores. Recent financial information for East Point is provided below (all numbers in thousands).
Fiscal Year 3
Fiscal Year 2
Net income
$134,300
$69,200
Interest expense
2,700
10,300
Fiscal Year 3
Fiscal Year 2
Fiscal Year 1
Total assets (at end of fiscal year)
$3,600,642
$3,425,000
$2,935,000
Total stockholders' equity (at end of fiscal year)
1,085,144
1.063,656
781,678
Assume the apparel industry average return on total assets is 8.0%, and the average return on stockholders' equity is 15.0% for the year ended April 2, Year 3.
a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round 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 to one decimal place.
Fiscal Year 3
Fiscal Year 2
0%
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. The return on total assets for East Point was
than the industry average. The
return on stockholders' equity was
* than the industry average. These relationships suggest that East Point has
* leverage than the industry, on average.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6795bcee-481e-4cd9-9402-1dd9d1389a86%2Fa033a507-b962-4826-ab01-02d0c45833fe%2Fwg0gdda_processed.png&w=3840&q=75)
Transcribed Image Text:East Point Retail, Inc., sells professional women's apparel through company-owned retail stores. Recent financial information for East Point is provided below (all numbers in thousands).
Fiscal Year 3
Fiscal Year 2
Net income
$134,300
$69,200
Interest expense
2,700
10,300
Fiscal Year 3
Fiscal Year 2
Fiscal Year 1
Total assets (at end of fiscal year)
$3,600,642
$3,425,000
$2,935,000
Total stockholders' equity (at end of fiscal year)
1,085,144
1.063,656
781,678
Assume the apparel industry average return on total assets is 8.0%, and the average return on stockholders' equity is 15.0% for the year ended April 2, Year 3.
a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round 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 to one decimal place.
Fiscal Year 3
Fiscal Year 2
0%
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. The return on total assets for East Point was
than the industry average. The
return on stockholders' equity was
* than the industry average. These relationships suggest that East Point has
* leverage than the industry, on average.
![East Point Retail, Inc., sells professional women's apparel through company-owned retail stores. Recent financial information for East Point is provided below (all numbers in thousands).
Fiscal Year 3
Fiscal Year 2
Net income
$134,300
$69,200
Interest expense
2,700
10,300
Fiscal Year 3
Fiscal Year 2
Fiscal Year 1
Total assets (at end of fiscal year)
$3,600,642
$3,425,000
$2,935,000
Total stockholders' equity (at end of fiscal year)
1,085,144
1.063,656
781,678
Assume the apparel industry average return on total assets is 8.0%, and the average return on stockholders' equity is 15.0% for the year ended April 2, Year 3.
a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round 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 to one decimal place.
Fiscal Year 3
Fiscal Year 2
0%
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. The return on total assets for East Point was
than the industry average. The
return on stockholders' equity was
* than the industry average. These relationships suggest that East Point has
* leverage than the industry, on average.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6795bcee-481e-4cd9-9402-1dd9d1389a86%2Fa033a507-b962-4826-ab01-02d0c45833fe%2Fxipz7c_processed.png&w=3840&q=75)
Transcribed Image Text:East Point Retail, Inc., sells professional women's apparel through company-owned retail stores. Recent financial information for East Point is provided below (all numbers in thousands).
Fiscal Year 3
Fiscal Year 2
Net income
$134,300
$69,200
Interest expense
2,700
10,300
Fiscal Year 3
Fiscal Year 2
Fiscal Year 1
Total assets (at end of fiscal year)
$3,600,642
$3,425,000
$2,935,000
Total stockholders' equity (at end of fiscal year)
1,085,144
1.063,656
781,678
Assume the apparel industry average return on total assets is 8.0%, and the average return on stockholders' equity is 15.0% for the year ended April 2, Year 3.
a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round 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 to one decimal place.
Fiscal Year 3
Fiscal Year 2
0%
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. The return on total assets for East Point was
than the industry average. The
return on stockholders' equity was
* than the industry average. These relationships suggest that East Point has
* leverage than the industry, on average.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
Step 1
Solution:-
a) Calculation of Return on total assets as follows:-
Return on Total Assets
= Operating Profit (EBIT) /Average Total Assets
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