Pacific Fixtures lists the following accounts as part of its balance sheet. Total assets $10,000,000 Accounts...

Pacific Fixtures lists the following accounts as part of its balance sheet. Total assets $10,000,000 Accounts payable $ 800,000 Notes payable (8%) 1,000,000 Bonds (10%) 3,200,000 Common stock at par 1,100,000 Contributed capital in excess of par 500,000 Retained earnings 3,400,000 Total liabilities and stockholders’ equity $10,000,000 Compute the return on stockholders’ equity if the company has sales of $20 million and the following net profit margin: 3 percent. Round your answer to one decimal place. 12.2 % 7 percent. Round your answer to one decimal place. %

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Expert Solution

The return on stockholder's equity is computed as shown below:

= (Net profit margin x Sales) / (Common stock + Contributed capital in excess of par + Retained earnings)

= (3% x $ 20 million) / ($ 1.1 million + $ 0.5 million + $ 3.4 million)

= $ 0.6 million / $ 5 million

= 12%

The return on stockholder's equity is computed as shown below:

= (Net profit margin x Sales) / (Common stock + Contributed capital in excess of par + Retained earnings)

= (12.2% x $ 20 million) / ($ 1.1 million + $ 0.5 million + $ 3.4 million)

= $ 2.44 million / $ 5 million

= 48.8%

The return on stockholder's equity is computed as shown below:

= (Net profit margin x Sales) / (Common stock + Contributed capital in excess of par + Retained earnings)

= (7% x $ 20 million) / ($ 1.1 million + $ 0.5 million + $ 3.4 million)

= $ 1.4 million / $ 5 million

= 28%

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jeff jeffy answered 1 year ago

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