Bootstrap Computer Company reported the following summary information in its annual report.

2004

Sales ..............$27,000

Net income ..............5,049

Total assets ............60,108

Stockholders’ equity .........40,070

Fixed assets ..............25,000

Income before interest & taxes .....10,278

Interest expense ............2,500

a. Compute each of the following ratios:

i. Profit margin

ii. Asset turnover

iii. Return on assets

iv. Return on equity

v. Fixed asset turnover

vi. Times interest earned

b. Explain how the return on equity measure includes information about all three activities in the transformation process.