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.

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 5P
icon
Related questions
Question

General Accounting

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.
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning