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 Fiscal 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 Fiscal Year Z b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. Fiscal Year3 Fiscal Year 2 c. The return on stockholders' equity is. the return on total assets due to the use of leverage. d. During fiscal Year 3, East Point's results were compared to the industry average. These relationships suggest that East Point's has leverage than the industry, on average. Previous Next Check My Work 3 more Check My Work uses remaining. 12:18
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 Fiscal 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 Fiscal Year Z b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. Fiscal Year3 Fiscal Year 2 c. The return on stockholders' equity is. the return on total assets due to the use of leverage. d. During fiscal Year 3, East Point's results were compared to the industry average. These relationships suggest that East Point's has leverage than the industry, on average. Previous Next Check My Work 3 more Check My Work uses remaining. 12:18
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: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 Fiscal 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
Fiscal Year Z
b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place.
Fiscal Year3
Fiscal Year 2
c. The return on stockholders' equity is.
the return on total assets due to the
use of leverage.
d. During fiscal Year 3, East Point's results were
compared to the industry average. These relationships suggest that East Point's has
leverage than the industry, on average.
Previous
Next
Check My Work 3 more Check My Work uses remaining.
12:18
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