Warne Enterprises decides to expand its operations by applying for an additional loan of $600,000 As a
Question:
Warne Enterprises decides to expand its operations by applying for an additional loan of $600,000 As a result, revenue from ordinary activities is expected to increase by $90,000 Financial data (assume average balances) before and after expansion include:
Before expansion | After expansion | ||||||
Total assets (average) | $3,488,400 | $4,186,000 | |||||
Total liabilities | 930,200 | 1,627,900 | |||||
Average shareholders’ equity | 2,558,200 | 2,558,100 | |||||
Revenue from ordinary activities | 1,050,000 | 1,154,600 | |||||
Interest expense | 69,800 | 93,000 | |||||
Other expenses | 170,000 | 210,000 | |||||
Profit before income tax | 810,200 | 851,600 | |||||
Income tax expenses (30 per cent) | 243,060 | 255,480 | |||||
Profit | $567,140 | $596,120 |
Calculate the following. (Round all answers to 2 decimal places, e.g. 15.25. Calculate ROA using profit (not EBIT).)
Before | After | ||||||||
a. | ROA ratio | % | % | ||||||
b. | ROE ratio | % | % | ||||||
c. | Debt to total assets ratio | % | % | ||||||
d. | Times interest earned ratio | times | times |
Advanced Accounting
ISBN: 978-0538480284
11th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng