Question
Profitability Ratios East Point Retail, Inc. sells apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands): Fiscal Year 3 Fiscal
Profitability Ratios
East Point Retail, Inc. sells apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands):
Fiscal Year 3Fiscal Year 2Net income (loss)$152,900$(78,700)Interest expense3,10011,800Fiscal Year 3Fiscal Year 2Fiscal Year 1Total assets (at end of fiscal year)$1,537,500$1,462,500$1,279,924Total stockholders' equity (at end of fiscal year)1,225,6271,201,357869,695Assume the apparel industry average return on total assets is 5.0% and the average return on stockholders' equity is 8.0% for the year ended February 2, Year 3.
a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to indicate a negative return on total assets.
Fiscal Year 3fill in the blank 1%Fiscal Year 2fill in the blank 2%b. Determine the return on stockholders equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to indicate a negative return on stockholders' equity.
Fiscal Year 3fill in the blank 3%Fiscal Year 2fill in the blank 4%c. In Fiscal Year 3, the return on stockholders' equity is
greater thanless thangreater than
the return on total assets due to the
positivenegativepositive
use of leverage.
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