Question

East Point Retail, Inc., sells professional women's apparel through company-owned retail stores. Recent financial information for East Point is provided below (all numbers in thousands).

	Fiscal Year 3		Fiscal Year 2
Net income	$152,300		$78,400
Interest expense	3,100		11,700

	Fiscal Year 3		Fiscal Year 2		Fiscal Year 1
Total assets (at end of fiscal year)	$3,250,715		$3,092,143		$2,720,761
Total stockholders' equity (at end of fiscal year)	1,106,640		1,084,726		804,430

Assume the apparel industry average return on total assets is 8.0%, and the average return on stockholders’ equity is 15.0% for the year ended April 2, Year 3.

a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round to one decimal place.

Fiscal Year 3	%
Fiscal Year 2	%

b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round to one decimal place.

Fiscal Year 3	%
Fiscal Year 2	%

Answer 1

Average total assets:
Year-3 (3250175+3092143) /2 =	3171159
Year-2 (3092143+2720761)/2 =	2906452
Average Stockholder's equity
Year-3 (1106,640+1084,726)/2=	1095683
YEar2 (1084,726+804,430)/2=	944578
Req a.
Return on Total assets
			Year-3	Year-2
Net Income		152300	78400
add: Interest		3100	11700
Income before interest	155400	90100
Divide: Average total assets	3171159	2906452
Return on Total assets	4.90%	3.10%
		Return on Total assets
Fiscal Year-3	4.90%
Fiscal Year-2	3.10%
Req b.
Return on Stockholder's equity
			Year-3	Year-2
Net Income		152300	78400
Divide: Average stockholder's equity	1095683	944578
Return on Stockholder's equity	13.90%	8.30%
		Return on Total assets
Fiscal Year-3	13.90%
Fiscal Year-2	8.30%