Question

Required:

1. Firm A has a margin of 11%, sales of $520,000, and ROI of 19%. Calculate the firm's average total assets.
2. Firm B has net income of $72,000, turnover of 1.40, and average total assets of $900,000. Calculate the firm's sales, margin, and ROI.
3. Firm C has net income of $132,000, turnover of 1.91, and ROI of 24.00%. Calculate the firm's margin, sales, and average total assets.

Firm A has a margin of 11%, sales of $520,000, and ROI of 19%. Calculate the firm's average total assets. (Round "Turnover" to 1 decimal place.)

Firm B has net income of $72,000, turnover of 1.40, and average total assets of $900,000. Calculate the firm's sales, margin, and ROI. (Round "Margin" and "ROI" answers to 1 decimal place.)

Firm C has net income of $132,000, turnover of 1.91, and ROI of 24.00%. Calculate the firm's margin, sales, and average total assets. (Round "Margin" answer to 1 decimal place and use the rounded answer for the subsequent computations.)

Answer 1

Requirement 1

Firm A

Net Income = sales x margin = $520,000 x 11 % = $57,200
ROI = ( Net Income / Average Total Assets ) = 19% (given)

Firm's average total assets = Net Income/ ROI
= $57,200 / 19%   
  = $301052.63

Firm B

Assets turnover ratio = Sales / Average total assets
Hence, Sales = Assets turnover ratio x Average total assets
= 1.40 x $900,000
= $1,260,000

Margin = Net Income / Sales
= $72,000 / $1,260,000 = 5.71 %

ROI = ( Net Income / Average Total Assets )
= $72,000 / $900,000 = 8%

Firm C

ROI = ( Net Income / Average Total Assets )
Average Total Assets = Net Income / ROI
= $132,000 / 24.00%
= $550,000
  
Assets turnover ratio = Sales / Average total assets
Sales = Assets turnover ratio * Average total assets
= 1.91 * $550,000
= $1,050,500

Margin = Net Income / Sales
= $132,000 / $1,050,500
   =12.565 %

Requirement 2 (Round off to one decimal)

Firm A

Net Income = sales x margin = $520,000 x 11 % = $57,200
ROI = ( Net Income / Average Total Assets ) = 19% (given)

Firm's average total assets = Net Income/ ROI
= $57,200 / 19%   
= $301052.63
= $301052.6 (Round off to one decimal)

Firm B

Assets turnover ratio = Sales / Average total assets
Hence, Sales = Assets turnover ratio x Average total assets
= 1.40 x $900,000
= $1,260,000

Margin = Net Income / Sales
= $72,000 / $1,260,000 = 5.71 % = 5.7% (Round off to one decimal)

ROI = ( Net Income / Average Total Assets )
= $72,000 / $900,000 = 8%

Firm C

ROI = ( Net Income / Average Total Assets )
Average Total Assets = Net Income / ROI
= $132,000 / 24.00%
= $550,000
  
Assets turnover ratio = Sales / Average total assets
Sales = Assets turnover ratio x Average total assets
= 1.91 * $550,000
= $1,050,500

Margin = Net Income / Sales
= $132,000 / $1,050,500
=12.565 %
=12.6% (Round off to one decimal)