Question
Need an interpretation explanation for the below answer. Part A) The return on assets can be calculated with the use of following formula: Return on
Need an interpretation explanation for the below answer.
Part A)
The return on assets can be calculated with the use of following formula:
Return on Assets = Net Income/Total Assets*100
Using the information available from the link for the Year 2015, we get,
Return on Assets = -133,754/421,694*100 = -31.72%
________
Part B)
The return on assets can be disaggregated with the use of Dupont formula for ROA as follows:
Disaggregating ROA = Profit Margin Ratio*Asset Turnover Ratio
Where Profit Margin = Net Income/Sales
and Asset Turnover = Sales/Total Assets
Using the information available from the link for the Year 2015, we get,
Disaggregating Return on Assets = -133,754/279,738*279,738/421,694 or -.48*.66 = -31.72% (there can be minor difference in answer on account of rounding off values)
________
Part C)
The return on equity can be calculated with the use of following formula:
Return on Equity = Net Income/Stockolder's Equity*100
Using the information available from the link for the Year 2015, we get,
Return on Equity = -133,754/374,954*100 = -35.67%
________
Part B)
The return on equity can be disaggregated with the use of Dupont formula for ROE as follows:
Disaggregating ROE = Profit Margin Ratio*Asset Turnover Ratio*Equity Multiplier
Where Profit Margin = Net Income/Sales
Asset Turnover = Sales/Total Assets
Equity Multiplier = Total Assets/Total Stockholder's Equity
Using the information available from the link for the Year 2015, we get,
Disaggregating Return on Equity = -133,754/279,738*279,738/421,694*421,694/374,954 or -.48*.66*1.12 = -35.67% (there can be minor difference in answer on account of rounding off values)
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