Question

In​ 2016, the Allen Corporation had sales of $ 62 ​million, total assets of $ 45 ​million, and total liabilities of $ 25 million. The interest rate on the​ company's debt is 5.6 ​percent, and its tax rate is 35 percent. The operating profit margin is 14 percent.

a. Compute the​ firm's 2016 net operating income and net income.

The​ firm's 2016 net operating income is ​$___ million. ​ (Round to two decimal​ places.)

The​ firm's 2016 net income is ​$ ___ million.  ​(Round to two decimal​ places.)

b. Calculate the​ firm's operating return on assets and return on equity.

The operating return on assets is ____%. ​ (Round to two decimal​ places.)

The return on equity is ____​%. ​(Round to two decimal​ places.)

Answer 1

a	Particulars	Amount
	Sales	$            62.00
	× 14%	14%
	Net operating income	$              8.68
	Less: interest	$             (1.40)
	Profit before tax	$              7.28
	Less: tax	$             (2.55)
	Net income	$              4.73

b

Net income	$              4.73
/ total assets	70
Return on assets	6.76%

Net income	$              4.73
/ equity	45
Return on equity	10.52%

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