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highlighted in blue is the information for Scandi home furnishings. I need help with part G. will upvote if I score correctly on my homework
highlighted in blue is the information for Scandi home furnishings. I need help with part G. will upvote if I score correctly on my homework
Scandi Home Furnishings, Inc. (Continued) Part C Your third challenge is to advise kaj on what has been happening to Scandi relative to financial developments in the home furnishings industry. G. Kaj has been able to obtain some industry ratio data from the home furnishings industry trade association to which he belongs. The industry association collects proprietary financial information from members of the association, compiles averages to protect the proprietary nature of the information, and provides averages for use by individual trade associ- ation members Trade association data for the home furnishings industry show an average net profit margin of 6.5 percent, a sales- to-assets ratio of 1.3 times, and a total debt-to-total-assets ratio of 55 percent over the 2014-2015 and 2015-2016 periods. Compare and contrast Scandi's results with the industry average in terms of the ROA and ROE models. Make sure you compare the components of each model as well as the product of the components. = Net profit margin x Assets turnover Return on assets (ROA) 2015 = 7.60% x 1.3636 times 2016 = 10.36% = 0.33% x 1.3483 times Return on Equity (BOE) 2015 = 0.45% = Net profit margin x Assets turnover Equity Multiplier = 7.60% x 1.3636 x (0.2533 +0.1036) 2016 = 25.33% =0.45% x 1.3483 x (0.0127 +0.0045) = 1.27% The above return on assets and return on equity models also present the same picture of decreased performance in 2016 when compared to 2015. This decline in performance is due to the sharp fall in profit margins of the company but financial leverage increased to 2.822 (0.0127 -0.0045) in 2016 when compared to 2.444 (0.2533-0.1036) in 2015 Notes: Net profit margin = Net Profit Sales Revenue 2015 = $114,000 - $1,500,000 2016 = 7.60% = $6,000 - $1,800,000 = 0.33%Step by Step Solution
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