Neiman Corp. has Net Income of $31,722 and Total Equity of $118,857. Also, its Sales are...

Neiman Corp. has Net Income of $31,722 and Total Equity of $118,857. Also, its Sales are $285,760, Total Assets are $245,626 and Total Liabilities are $126,769, but only $41,769 are from Current Liabilities. Porter’s Debt/Equity ratio is accordingly 1.067. Neiman's Total Asset Turnover ratio suggests that $1.163 dollars in sales is generated for each $1 of assets. Also, the Profit Margin shows that the firm has a Net Income of $0.111 for every $1 in sales.

Industry average ratios: ROE = 22.75%, Profit Margin = 13% Total Asset Turnover = 1.4 Equity Multiplier = 1.25. The ROE of the firm is 26.68%. What can you say about the firm?

Which of the following is correct?

The firm is less efficient in utilizing its assets to generate sales than the industry on average.
The firm uses more equity in its capital structure as compared to the industry on average.
The firm is more levered (has more leverage) as compared to the industry on average.
The firm has a lower Profit Margin than the industry on average.
ROE and ROA for the firm are higher than those of the industry on average.

A. 2 and 5

B. 1

C. 2 and 3

D. 1,3, and 4

E. 1, 3 and 5

F. 1,2 and 3

Expert Solution

ekkarill92 answered 2 years ago

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