Profitability RatiosEast Point Retal, Inc. seils apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands):Fiscal Year 3 Fiscal Year 2$145,000$(74,600)3,00011,200Fiscal Year 3Fiscal Year 2 Fiscal Year 1Net income (los)Interest expenseTotal assets (at and of fiscal year)Total stockholders equity (at end of fiscal year)Assume the apparel industry average return on total assets is 5.0% and the average return on stockholders' equity is 8.0% for the year ended February 2, Year 3.$1,307,7591,010,000Fiscal Year 3Fiscal Year 2$1,243,965990,000$1,106,719724,942a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to indicate anegative return on total assets.%b. Determine the retum on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign toindicate a negative return on stockholders' equity.Fiscal Year 3Fiscal Year 2c. In Fiscal Year 3, the return on stockholders' equity isthe return on total assets due to theuse of leverage.

A ratio called return on total assets (ROTA) compares the profits before interest and taxes (EBIT)…

Profitability Ratios East Point Retal, Inc. sals apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands): Fiscal Year 3 Fiscal Year 2 Net income (los) Interest expense Total assets (at and of fiscal year) Total stockholders' equity (at end of fiscal year) $145,000 $(74,600) 3,000 11,200 Fiscal Year 3 Fiscal Year 2 Fiscal Year 1 Fiscal Year 3 Fiscal Year 2 $1,307,759 $1,243,965 1,010,000 990,000 $1,106,719 724,942 Assume the apparel industry average return on total assets is 5.0% and the average return on stockholders' equity is 8.0% for the year ended February 2, Year 3. a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to indicate a negative return on total assets. b. Determine the retum on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to indicate a negative return on stockholders' equity. Fiscal Year 3 Fiscal Year 2 c. In Fiscal Year 3, the retum on stockholders' equity is the return on total assets due to the use of leverage.

Profitability Ratios East Point Retal, Inc. sals apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands): Fiscal Year 3 Fiscal Year 2 Net income (los) Interest expense Total assets (at and of fiscal year) Total stockholders' equity (at end of fiscal year) $145,000 $(74,600) 3,000 11,200 Fiscal Year 3 Fiscal Year 2 Fiscal Year 1 Fiscal Year 3 Fiscal Year 2 $1,307,759 $1,243,965 1,010,000 990,000 $1,106,719 724,942 Assume the apparel industry average return on total assets is 5.0% and the average return on stockholders' equity is 8.0% for the year ended February 2, Year 3. a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to indicate a negative return on total assets. b. Determine the retum on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to indicate a negative return on stockholders' equity. Fiscal Year 3 Fiscal Year 2 c. In Fiscal Year 3, the retum on stockholders' equity is the return on total assets due to the use of leverage.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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