Question

The following information was available for the year ended December 31, 2022: Sales $ 400,000 Net income 57,800 Average total assets 700,000 Average total stockholders' equity 340,000 Required: Calculate margin, turnover, and ROI for the year ended December 31, 2022. Calculate ROE for the year ended December 31, 2022.

Answer 1

To calculate margin, we divide net income by sales: 57,800/400,000 = 0.1445. To calculate turnover, we divide sales by average total assets: 400,000/700,000 = 0.5714. To calculate return on investment (ROI), we multiply margin by turnover: 0.1445 * 0.5714 = 0.0826, or 8.26%. To calculate return on equity (ROE), we divide net income by average total stockholders' equity: 57,800/340,000 = 0.1700, or 17%.

Step-by-step explanation:

To calculate margin, we divide net income by sales: 57,800/400,000 = 0.1445. To calculate turnover, we divide sales by average total assets: 400,000/700,000 = 0.5714. To calculate return on investment (ROI), we multiply margin by turnover: 0.1445 * 0.5714 = 0.0826, or 8.26%. To calculate return on equity (ROE), we divide net income by average total stockholders' equity: 57,800/340,000 = 0.1700, or 17%.