What are the firm’s ROE for 2018 and 2019?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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What are the firm’s ROE for 2018 and 2019?

Income Statements ($ in millions)

Balance Sheets ($ in millions)

 

2018

2019

Assets

2018

2019

Sales Revenue

$2,580

$2,865

Cash

$70

$50

Less: Cost of goods sold

$1,060

$1,500

Short-Term investments

$35

$9

Less: Operating Expenses

$105

$162

Accounts rec.

400

460

Less: Depreciation

$85

$80

Inventory

490

556

Earnings before interest and taxes

$1,330

$1,123

Total Current Assets

$995

$1,075

Less: Interest paid

$350

$380

Net fixed assets

1890

1,910

Taxable Income

$980

$743

   

 

Less: Taxes (40%)

$392

$297

Total assets

$2,885

2,985

Net income

$588

$446

Liabilities and Owner's Equity

 

 

Dividends (45%)

$265

$201

 

2018

2019

Additions to Retained Earnings

$323

$245

Accounts payable

$240

$210

 

Accruals

$20

$20

 

Notes payable

65

74

 

Total Current Liabilities

$325

$304

 

Long-term debt

884

1090

 

Total Liabilities

$1,209

$1,394

 

Common stock

1341

1011

 

Retained earnings

335

$580

 

Total Equity

1676

$1,591

 

Total liab.& equity

$2,885

$2,985

 

  a.

20.45%, 19.80%

  b.

35.08%, 28.02%

  c.

22.79%, 15.56%

  d.

31.77%, 26.02%

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