Mgmt_200_Spring_2008_solutions_2-15-08(2,16)

Mgmt_200_Spring_2008 - $1,030 = 0.065 $15,854 $477 = 0.033 $14,455 Net Sales Average Total Assets $15,854 = 1.57 $10,123 $14,455 = 1.64 $8,793

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Management 200 – Introductory Financial Accounting– Spring 2008 Krannert School of Management - Purdue University Solutions to class assignment for February 15, 2008 E5-16. 1. Current Year Prior Year Net income (given) Average Shareholders' Equity (given) $1,030 = .24 $4,221 $477 = 0.14 $3,334 The increase in ROE from 0.14 in the prior year to 0.24 in the current year means that the firm earned $0.10 more for each $1 of stockholders’ investment. 2. ROE Analysis Current Year Prior Year Net Income Net Sales
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Unformatted text preview: $1,030 = 0.065 $15,854 $477 = 0.033 $14,455 Net Sales Average Total Assets $15,854 = 1.57 $10,123 $14,455 = 1.64 $8,793 Average Total Assets Average Shareholders' Equity $10,123 = 2.40 $4,221 $8,793 = 2.64 $3,334 Return on Equity 0.24 0.14 The increase in ROE is caused by the increase in net profit margin (from 0.033 in the prior year to 0.065 in the current year). This increase is offset partially by small declines in asset turnover and financial leverage....
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This note was uploaded on 11/22/2009 for the course MGMT 200 taught by Professor Greigg during the Spring '08 term at Purdue University-West Lafayette.

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