The following summary financial statistics were obtained from the 2015 Otago Bay Marine Motors (OBMM) annual report.

Question:

2015 ($ in millions)

Sales revenue ......................... $179.3

Total assets ........................... $136.3

Net earnings ........................... $ 20.2

Shareholders' equity ................ $109.6

a. Use the profit margin and asset turnover to compute the 2015 ROA for OBMM. Now introduce the equity multiplier to find ROE.

b. Use the summary financial information from the 2016 OBMM financial statements to compute the 2016 ROA and ROE. Use the same procedures to calculate 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 2015 and 2016. 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?

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.