Profitability Ratios 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 $141,900 $73,100 Interest expense 2,900 10,900 Fiscal Year 3 Fiscal Year 2 Fiscal Year 1 Total assets (at end of fiscal year) $2,215,224 $2,107,164 $1,892,836 Total stockholders' equity (at end of fiscal year) 1,224,949 887,879 1,200,693 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 v 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 v than the industry average. These relationships sugges than the industry average. The return on stockholders' equity was East Point has leverage than the industry, on average.

FINANCIAL ACCOUNTING

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Profitability Ratios
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 2
EGO
Fiscal Year 3
Net income
$141,900
$73,100
Interest expense
2,900
10,900
Fiscal Year 3
Fiscal Year 2
Fiscal Year 1
Total assets (at end of fiscal year)
$2,215,224
$2,107,164
$1,892,836
Total stockholders' equity (at end of fiscal year)
1,224,949
1,200,693
887,879
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
v 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. These relationships suggest tha
than the industry average. The return on stockholders' equity was
East Point has
leverage than the industry, on average.
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Profitability ratios are an important financial ratios which helps stakeholders like investors, shareholders and customers to analyze the profitability of the company by analyzing the different ratios like return on assets, return on investment and net profit margin ratio.

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