Problem 12-6 Microsoft Edge edugen wileyplus.com/edugen/shared/assignment/test/q
ID: 2455208 • Letter: P
Question
Problem 12-6 Microsoft Edge edugen wileyplus.com/edugen/shared/assignment/test/qprint.uni *Problem 12-6 Consider the following information for HandyCraft Stores for 2014 and 2015: 2014 2015 Total assets $59,100,000 $56,400,000 Noninterest-bearing current liabilities 4,470,000 4,910,000 Net income 3,630,000 4,960,000 Interest expense 2,470,000 2,900,000 Sales 66,000,000 96,250,000 30% Tax rate 30% Compute ROI for both years. (Round answers to 2 decimal places, e.g. 15.32%) 2014 2015 ROI Break ROI down into profit margin and investment turnover. (Round answers to 4 decimal places, e.g. 15.3215) 2014 2015 Profit margin Investment turnover Copyright 2000-2015 by John Wiley & Sons, Inc. or related companies. All rights reserved O Ask me anything Question Attempts: 0 of 5 used 9:17 PM 11/26/2015Explanation / Answer
Return on inome = Net income after tax/Investments
2014
ROI = 3630000 * (1-0.3) / 59100000 = 4.2%
2015
ROI = 4960000 * (1-0.3) / 56400000 = 6.2%
Profit margin = Net income after tax / Turnover
2014
Profit margin = 3630000 * (1-0.3) / 66000000 = 3.85%
2015
Profit margin = 4960000 * (1-0.3) / 96250000 = 3.61%
Investment turnover = Net income/Total assets
2014
Investment turnover = 3630000 / 59100000 = 6.14%
2015
Investment turnover = 4960000 / 56400000 = 8.79%