P7.18 The following summary financial statistics were obtained from the 2009 Otago Bay Marine Motors (OBMM) annual report. Net sales Total assets Net earnings Shareholders' equity 2009 (S in millions) $179.3 $136.3 $ 20.2 $109.6

a. Use the profit margin and asset turnover to compute the 2009 ROA for OBMM. Now introduce the equity multiplier to find ROE.

b. Use the summary financial information from the 2010 OBMM financial statements (see Problem 7.17) to compute the 2010 ROA and ROE. Use the same procedures to cal- culate these measures as you did in part

a. c. On the basis of your calculations, describe how each of the three components (profit margin, asset turnover, and leverage) contributed to the change in OBMM's ROA and ROE between 2009 and 2010. Which component(s) contributed the most to the change in ROA? Which contributed the most to the change in ROE?

d. Generally speaking, do you think that these changes are fundamentally healthy for the company?