Data from the financial statements of Eclectic Candle Company included the following: Average total assets ...................................................................... $

Question:

Data from the financial statements of Eclectic Candle Company included the following:

Average total assets ...................................................................... $ 50,000
Average common stockholders’ equity ......................................... 20,000
Net sales ......................................................................................... 100,000
Net income ......................................................................................... 7,500

The company had no preferred stock.

Requirements

1. Calculate the following ratios:

a. Net profit margin

b. Asset turnover ratio

c. Leverage ratio

d. Return on assets (ROA)

e. Return on equity (ROE)

2. Which is higher, ROA or ROE? Does this make sense for stockholders? Why or why not?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.

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