Morris Corporation has the following information on its balance sheets

Question

Morris Corporation has the following information on its balance sheets: Cash = $40, accounts receivable = $30, inventories = $100, net fixed asset = $500, accounts payable = $20, accruals = $10, short-term debt (matures in less than a year) = $25, long-term debt = $200, and total common equity = $415. Its income statement reports: Sales = $820, costs of goods sold (excluding depreciation) = $450, depreciation = $50, other operating expenses = $100, interest expense = $20, and tax rate = 25%. Net profit margin, operating profit margin, basic earning power ratio, return on total assets , and return on common equity.

Answer 1

Net Profit Margin = (Net Income / Sales) * 100

Operating Profit Margin = (EBIT / Sales) * 100

Basic Earning Power (BEP) Ratio = (EBIT / Total Assets) * 100

Return on Total Assets (ROA) = (Net Income / Total Assets) * 100

Return on Common Equity (ROE) = (Net Income / Total Common Equity) * 100

EBIT = Sales - COGS - Depreciation - Operating Expenses

Net Income = (EBIT - Interest Expense) * (1 - Tax Rate)

Total Assets = Cash + Accounts Receivable + Inventories + Net Fixed Assets

Using these formulas and the provided values, you should get the following:

Net Profit Margin: 18.29%

Operating Profit Margin: 26.83%

Basic Earning Power (BEP) Ratio: 32.84%

Return on Total Assets (ROA): 22.39%

Return on Common Equity (ROE): 36.14%

Hope this was helpful.