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Excel Analytics 16-2 (Static) Return on Equity (ROE) [LO16-3, 16-4, 16-5]

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[The following information applies to the questions displayed below.] Edman Company is a merchandiser that has provided the following balance sheet and income statement for this year.

		Beginning Balance			Ending Balance
Assets
Cash	$	62,800		$	150,000
Accounts receivable		160,000			180,000
Inventory		230,000			240,000
Property, plant & equipment (net)		833,000			793,000
Other assets		37,000			37,000
Total assets	$	1,322,800		$	1,400,000
Liabilities & Stockholders Equity
Accounts payable	$	70,000		$	80,000
Bonds payable		550,000			550,000
Common stock		410,000			410,000
Retained earnings		292,800			360,000
Total liabilities & stockholders equity	$	1,322,800		$	1,400,000

		This Year
Sales	$	2,500,000
Variable expenses:
Cost of goods sold		1,600,000
Variable selling expense		240,000
Total variable expenses		1,840,000
Contribution margin		660,000
Fixed expenses:
Fixed selling expenses		220,000
Fixed administrative expenses		300,000
Total fixed expenses		520,000
Net operating income		140,000
Interest expense (8%)		44,000
Net income before tax		96,000
Tax expense (30%)		28,800
Net income	$	67,200

Excel Analytics 16-2 (Static) Part 2

2. Refer to the Requirement 2 ROE Diagram tab within your template. For this year, complete the diagram by using appropriate formulas and reference cells. (In some instances your formulas and reference cells will refer to the Requirement 1 Financials tab.)

a. Which choice shows the formulas used to compute the net profit margin percentage and total asset turnover?

b. What is this years net profit margin percentage, total asset turnover, equity multiplier, and return on equity (ROE)? (Round your answers to 2 decimal places.) For next year, the company is interested in pursuing one of three proposed courses of action. Each of these alternatives will be independently evaluated in subsequent requirements.