Stoney Mason, Inc., has sales of $6 million, a total asset turnover ratio of 6 for the year, and net profits of $120,000. a. What is the company's return on assets or earning power? b. The company is considering the installation of new point-of-sales cash registers throughout its stores. This equipment is expected to increase efficiency in inventory control, reduce clerical errors, and improve record-keeping throughout the system. The new equipment will increase the investment in assets by 20 percent and is expected to increase the net profit margin from 2 to 3 percent. No change in sales is expected. What is the effect of the new equipment on the return on assets ratio or earning power?
Stoney Mason, Inc., has sales of $6 million, a total asset turnover ratio of 6 for the year, and net profits of $120,000. a. What is the company's return on assets or earning power? b. The company is considering the installation of new point-of-sales cash registers throughout its stores. This equipment is expected to increase efficiency in inventory control, reduce clerical errors, and improve record-keeping throughout the system. The new equipment will increase the investment in assets by 20 percent and is expected to increase the net profit margin from 2 to 3 percent. No change in sales is expected. What is the effect of the new equipment on the return on assets ratio or earning power?
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter10: Forecasting Financial Statement
Section: Chapter Questions
Problem 9PC: The Home Depot is a leading specialty retailer of hardware and home improvement products and is the...
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