Elizabeth Tailors Inc. has assets of $8,940,000 and turns over its assets 1.9 times per year. Return on assets is 13.5 percent. What is the firm’s profit margin (returns on sales)?
The profit margin of the company is 7.11%.
Total sales = Assests turn over ratio X Average total assets
= 1.90X $ 8940000
= $ 16986000
Net income = Return on assests X Total assests
=13.5% X $ 8940000
= $ 1206900
Profit margin = Net income / Total sales
=$1206900/ $ 16986000
= 7.11 %
Using the income statement for Times Mirror and Glass Co., compute the following ratios:
b. The fixed charge coverage.
Times mirror and glass company
Less: Cost of goods sold
Less: selling and administrative expenses
Less: Interest expenses
Earning before taxes
Less: Taxes (30%)
Earning after taxes
*equal income before interest and taxes
Nova Electrics anticipates cash flow from operating activities of $6 million in 20X1. It will need to spend $1.2 million on capital investments to remain
competitive within the industry. Common stock dividends are projected at
$.4 million and preferred stock dividends at $.55 million.
a. What is the firm’s projected free cash flow for the year 20X1?
b. What does the concept of free cash flow represent?
All State Trucking Co. has the following ratios compared to its industry for last year:
Return on sales
Return on assets
Explain why the return-on-assets ratio is so much more favorable than thereturn-on-sales ratio compared to the industry. No numbers are necessary;a one-
sentence answer is all that is required.
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