Jerry Rice and Grain Stores have $4,630,000 in yearly sales. The firm earns 3.5 percent on each dollar of sales and turns over its assets 3.0 times per year. It has $197,000 in current liabilities and $313,000 in long-term liabilities. a) What is its return on stockholders' equity? b) If the asset base remains the same as computed in part a, but total asset turnover goes up to 4.00, what will be the new return on stockholders' equity? Assume that the profit margin stays the same as do current and long-term liabilities.

Intermediate Financial Management (MindTap Course List)
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ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
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Chapter21: Supply Chains And Working Capital Management
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Jerry Rice and Grain Stores have $4,630,000 in
yearly sales. The firm earns 3.5 percent on each
dollar of sales and turns over its assets 3.0 times
per year. It has $197,000 in current liabilities and
$313,000 in long-term liabilities.
a) What is its return on stockholders' equity?
b) If the asset base remains the same as computed
in part a, but total asset turnover goes up to 4.00,
what will be the new return on stockholders'
equity? Assume that the profit margin stays the
same as do current and long-term liabilities.
Transcribed Image Text:Jerry Rice and Grain Stores have $4,630,000 in yearly sales. The firm earns 3.5 percent on each dollar of sales and turns over its assets 3.0 times per year. It has $197,000 in current liabilities and $313,000 in long-term liabilities. a) What is its return on stockholders' equity? b) If the asset base remains the same as computed in part a, but total asset turnover goes up to 4.00, what will be the new return on stockholders' equity? Assume that the profit margin stays the same as do current and long-term liabilities.
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