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Chapter 2: 3BP (page 78)

Polly Esther Dress Shops Inc. can open a new store that will do an annual sales volume of $837,900. It will turn over its assets 1.9 times per year. The profit margin on sales will be 8 percent. What would net income and return on assets (investment) be for the year?

Short Answer

Expert verified

The net income of the company is $67,032, and the return on assets for the year is 15.20%.

Step by step solution

01

Net Income

Netincome=Sales×Profitmargin=$837,900×8%=$67,032

02

Calculation of total assets

AverageTotalassests=NetsalesAsseststurnoverratios=$837,9001.90=$441,000

03

Calculation of Return on assets

Returnonassests=NetIncomeTotalAssests=$67,032$441,000=15.20%

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