Coachfollies Bookstore - The Only Bookstore Near Campus

Question

Coachfollies Bookstore The Only Bookstore Close To Campus Had Net In Coachfollies Bookstore, the only bookstore close to campus, had net income in 1996 of $90,000. Here are some of the financial ratios from the annual report. Profit Margin 12%, Return on Investment 20%, Debt to Asset Ratio 55%. Using these ratios, calculate the following for Follies Bookstore: a) Sales b) Total assets c) Total asset turnover d) Total debt e) Stockholders' equity f) Return on equity.

Dr. Jack HW Helper · Accepted Answer

The financial analysis of Coachfollies Bookstore requires the calculation of various key financial metrics based on the provided ratios and net income. Given the ratios—profit margin, return on investment, and debt-to-asset ratio—and the net income figure, we will derive sales, total assets, asset turnover, total debt, stockholders’ equity, and return on equity. 1. Calculating Sales Profit margin is defined as net income divided by sales: $$ \text{Profit Margin} = \frac{\text{Net Income}}{\text{Sales}} $$ Rearranged to find sales: $$ \text{Sales} = \frac{\text{Net Income}}{\text{Profit Margin}} $$ Given: - Net income = $90,000 - Profit margin = 12% = 0.12 Calculating: $$ \text{Sales} = \frac{90,000}{0.12} = 750,000 $$ Thus, the total sales for Coachfollies Bookstore in 1996 were $750,000. 2. Calculating Total Assets Return on Investment (ROI), often equated with Return on Assets (ROA), is defined as net income divided by total assets: $$ \text{ROI} = \frac{\text{Net Income}}{\text{Total Assets}} $$ Rearranged to find total assets: $$ \text{Total Assets} = \frac{\text{Net Income}}{\text{ROI}} $$ Given: - Net income = $90,000 - ROI = 20% = 0.20 Calculating: $$ \text{Total Assets} = \frac{90,000}{0.20} = 450,000 $$ Hence, total assets amount to $450,000. 3. Calculating Total Asset Turnover Total asset turnover ratio measures how efficiently a company uses its assets to generate sales: $$ \text{Asset Turnover} = \frac{\text{Sales}}{\text{Total Assets}} $$ Using the previous calculations: $$ \text{Asset Turnover} = \frac{750,000}{450,000} = 1.67 $$ This indicates that Coachfollies bookstore generates approximately $1.67 in sales for each dollar of assets. 4. Calculating Total Debt The debt-to-asset ratio indicates the proportion of total assets financed by debt: $$ \text{Debt-to-Asset Ratio} = \frac{\text{Total Debt}}{\text{Total Assets}} $$ Given: - Debt-to-asset ratio = 55% = 0.55 - Total assets = $450,000 Calculating total debt: \[ \text{Total Debt} = 0.55 \times 450,

Coachfollies Bookstore - The Only Bookstore Near Campus

Coachfollies Bookstore The Only Bookstore Close To Campus Had Net In

Paper For Above instruction

1. Calculating Sales

2. Calculating Total Assets

3. Calculating Total Asset Turnover

4. Calculating Total Debt

5. Calculating Stockholders' Equity

6. Calculating Return on Equity (ROE)

Summary

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