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

Solutions

Expert Solution

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

5. Total sales of ABC Corp. are $ 100 M and net income is $ 11,5M....

5. Total sales of ABC Corp. are $ 100 M and net income is $ 11,5M. The manager thinks eliminating the group marginal customers that constitutes the 10% of the total sales, will increase. Distributing the incomes and expenses of the Company between the marginal customers and credible customers based on income statement, indicate whether the company should eliminate marginal customers or not. Percentage of sales total fixed variable Cost of sales (%) 70 - 70 Overhead cost (%) 15...

Total sales of ABC Corp. is $100 M and net income is $11.5M. The manager belives...

Total sales of ABC Corp. is $100 M and net income is $11.5M. The manager belives that eliminating the group marginal customers which constitutes 10% of the total sales, will increase the performance of the company. Distribute the revenue and expenses of BC Corp. between the marginal customers and credible customers, based on income statement, indicate whether the company should eliminate marginal customers or not, in terms of net profit margin. Percentage of sales total/ fixed/ variable Cost of sales...

A company has $20 billion of sales and $1 billion of net income. Its total assets...

A company has $20 billion of sales and $1 billion of net income. Its total assets are $10 billion. The company’s total assets equal total invested capital, and its capital consists of half debt and half common equity. The firm’s interest rate is 5%, and its tax rate is 25%. What is its profit margin? What is its ROA? What is its ROE? What is its ROIC? Would this firm’s ROA increase if it used less leverage? (The size of...

RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $150,000, a net income of...

RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $150,000, a net income of $15,000, and the following balance sheet: Cash $48,285 Accounts payable $51,330 Receivables 77,430 Notes payable to bank 26,535 Inventories 191,400 Total current liabilities $77,865 Total current assets $317,115 Long-term debt 70,470 Net fixed assets 117,885 Common equity 286,665 Total assets $435,000 Total liabilities and equity $435,000 The new owner thinks that inventories are excessive and can be lowered...

RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $300,000, a net income of...

RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has sales of $300,000, a net income of $24,000, and the following balance sheet: Cash $78,000 Accounts payable $71,760 Receivables 101,400 Notes payable to bank 46,800 Inventories 374,400 Total current liabilities $118,560 Total current assets $553,800 Long-term debt 113,100 Net fixed assets 226,200 Common equity 548,340 Total assets $780,000 Total liabilities and equity $780,000 The new owner thinks that inventories are excessive and can be lowered to the point where the current...

Barnes and Noble has a total debt-equity ratio of 40 percent, sales of $800,000, a net...

Barnes and Noble has a total debt-equity ratio of 40 percent, sales of $800,000, a net profit margin of 7.5 percent, and total debt of $240,000. Calculate the firm’s ROE. If the firm increases its debt-equity ratio will the ROE increase or decrease? (Hint: think about the Dupont Identity.) 10.00 percent, increase 10.00 percent, decrease 38.99 percent, increase 38.99 percent, decrease 5.67 percent, increase

ABC Corp has net income of $75 million, total liabilities of $100 million, 45% of which...

ABC Corp has net income of $75 million, total liabilities of $100 million, 45% of which is interest-bearing debt at 8% interest. The ROE for XYZ is 15% and the tax rate is 25%. Find ABC’s ROA and ROIC.

Company had $25,000,000 in sales last year. The company's net income was $875,000. Its total assets...

Company had $25,000,000 in sales last year. The company's net income was $875,000. Its total assets equal $8,000,000. The company's ROE was 16%. The company is financed entirely with debt and common equity. What is the company's debt ratio? A. 31.6% B. 3.5% C. 10.9% D. 14.6% E. 64.4%

a company beginning inventory is $130000 its net purchases are $220000 and its net sales total...

a company beginning inventory is $130000 its net purchases are $220000 and its net sales total $470000 its normal gross profit percentage is 30% of sales using the gross profit method how much is ending inventory A. $21,000 B. $141,000 C. $250,000 D. $ 239,000 An understatement of ending inventory by $2 million in one period results in A. an overstatement of gross profit by $2 million in next period B. an understatement of gross profit by $2 million in...

During a recent year, the Corp. reported net income of $25,000. The company also reported the...

During a recent year, the Corp. reported net income of $25,000. The company also reported the following activities: a. Purchased equipment for $6,000 in cash. b. Issued common stock for $1,000 in cash c. Depreciation of equipment was $9,000 for the year More information is presented below. Current year Prior year Assets Cash and cash equivalents $84,000 $48,700 Accounts receivable 53,600 50,000 Inventory 39,600 39,000 Prepaid expenses 5,500 15,000 Equipment 206,000 200,000 Accumulated depreciation (126,700) (117,700) Liabilities Current liabilities ...

Subjects