Ln eBook E Calculator 2 Print Item Profitability Ratios East Point Retail, Inc. sells apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands): Fiscal Year 3 Flscal Year 2 Net income $131,700 $67,900 Interest expense 2,700 10,100 Fiscal Year 3 Flscal Year 2 Fiscal Year 1 Total assets (at end of fiscal year) $1,601,861 $1,523,721 $1,365,167 Total stockholders' equity (at end of fiscal year) 978,066 958,698 697,400 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. Fiscal Year3 5.4 5.4 X % Fiscal Year2 8.6 b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. Fiscal Year 3 8.3 Fiscal Year 2 13.6 X % c. The return on stockholders' equity is greater than the return on total assets due to the positive v use of leverage. d. During fiscal Year 3, East Point's results were strong compared to the industry average. These relationships suggest that East Point's has Previous Next Check My Work 2 more Check My Work uses remaining.
Ln eBook E Calculator 2 Print Item Profitability Ratios East Point Retail, Inc. sells apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands): Fiscal Year 3 Flscal Year 2 Net income $131,700 $67,900 Interest expense 2,700 10,100 Fiscal Year 3 Flscal Year 2 Fiscal Year 1 Total assets (at end of fiscal year) $1,601,861 $1,523,721 $1,365,167 Total stockholders' equity (at end of fiscal year) 978,066 958,698 697,400 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. Fiscal Year3 5.4 5.4 X % Fiscal Year2 8.6 b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. Fiscal Year 3 8.3 Fiscal Year 2 13.6 X % c. The return on stockholders' equity is greater than the return on total assets due to the positive v use of leverage. d. During fiscal Year 3, East Point's results were strong compared to the industry average. These relationships suggest that East Point's has Previous Next Check My Work 2 more Check My Work uses remaining.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter16: Financial Statement Analysis
Section: Chapter Questions
Problem 18E
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Transcribed Image Text:Ln
eBook
E Calculator
2 Print Item
Profitability Ratios
East Point Retail, Inc. sells apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands):
Fiscal Year 3 Flscal Year 2
Net income
$131,700
$67,900
Interest expense
2,700
10,100
Fiscal Year 3 Flscal Year 2 Fiscal Year 1
Total assets (at end of fiscal year)
$1,601,861
$1,523,721
$1,365,167
Total stockholders' equity (at end of fiscal year)
978,066
958,698
697,400
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.
Fiscal Year3
5.4
5.4 X %
Fiscal Year2
8.6
b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place.
Fiscal Year 3
8.3
Fiscal Year 2
13.6 X %
c. The return on stockholders' equity is greater than
the return on total assets due to the positive v
use of leverage.
d. During fiscal Year 3, East Point's results were strong compared to the industry average. These relationships suggest that East Point's has
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