East Point Retail, Inc., sells apparel through company-owned retail stores. Financial information for East Point follows (in thousands): Line Item Description Fiscal Year 3 Fiscal Year 2 Net income $143,300    $73,800    Interest expense 2,900    11,000    Line Item Description Fiscal Year 3 Fiscal Year 2 Fiscal Year 1 Total assets (at end of fiscal year) $3,058,265 $2,909,081 $2,561,887 Total stockholders' equity (at end of fiscal year) 1,104,832 1,082,954 785,400 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 your answers to one decimal place. Line Item Description Percentage Fiscal Year 3 fill in the blank 1 % Fiscal Year 2 fill in the blank 2 % b.  Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round your answers to one decimal place. Line Item Description Percentage Fiscal Year 3 fill in the blank 3 % Fiscal Year 2 fill in the blank 4 % 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 fill in the blank 1 of 4    compared to the industry average. The return on total assets for East Point was fill in the blank 2 of 4    than the industry average. The return on stockholders’ equity was fill in the blank 3 of 4    than the industry average. These relationships suggest that East Point has fill in the blank 4 of 4

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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East Point Retail, Inc., sells apparel through company-owned retail stores. Financial information for East Point follows (in thousands):

Line Item Description Fiscal Year 3 Fiscal Year 2
Net income $143,300    $73,800   
Interest expense 2,900    11,000   
Line Item Description Fiscal Year 3 Fiscal Year 2 Fiscal Year 1
Total assets (at end of fiscal year) $3,058,265 $2,909,081 $2,561,887
Total stockholders' equity (at end of fiscal year) 1,104,832 1,082,954 785,400

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 your answers to one decimal place.

Line Item Description Percentage
Fiscal Year 3 fill in the blank 1 %
Fiscal Year 2 fill in the blank 2 %

b.  Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round your answers to one decimal place.

Line Item Description Percentage
Fiscal Year 3 fill in the blank 3 %
Fiscal Year 2 fill in the blank 4 %

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 fill in the blank 1 of 4

 

 compared to the industry average. The return on total assets for East Point was fill in the blank 2 of 4

 

 than the industry average. The return on stockholders’ equity was fill in the blank 3 of 4

 

 than the industry average. These relationships suggest that East Point has fill in the blank 4 of 4

 

 leverage than the industry, on average.

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