# Financial Accounting

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Submitted By PriyankaAgarwal
Words 934
Pages 4
Homework 2
1. ABC earned a net profit margin of 6.7% last year and had an equity multiplier of 3.5. If its total assets are \$97 million and its sales are 171 million, what is the firm's return on equity?
Net profit margin = Net profit / sales
Sales = 171 million
Net profit margin = 6.7%
Net profit = 171 * 6.7% = 11.46 million
Equity multiplier = Total assets/ shareholders equity
3.5 = 97 / shareholders’ equity
Equity = 97/3.5 = 27.71
Return on Equity = Net profit /Equity = 11.46/27.72 = 41.34%

2. ABC's balance sheet indicates a book value of shareholders' equity of \$866,173. The firm's earning per share are \$2.6 and the price-earnings ratio is 12.98. If there are 56,487 shares outstanding, what is the market value per share?
Hint: Market value per share is same as market price per share.
Price – earnings Ratio = Market price / Earnings per share 12.98 = Market Price / 2.6
Market price = 12.98 * 2.6 = \$33.75 per share
3. XYZ earned a net profit margin of 4.5% last year and had an equity multiplier of 3.2. If its total assets are \$111 million and its sales are 176 million, what is the firm's return on assets?
Net profit margin = Net profit / sales
Sales = 176 million
Net profit margin = 4.5%
Net profit = 176 * 4.5% = 7.92 million
Return on Assets = Net Profit / Total assets = 7.92/111 = 7.14%
4. ABC has total sales of \$207, assets of \$106, return on equity of 24%, and net profit margin of 5%. What is the debt ratio?
Enter you answer in percentages rounded off to two decimal points.
Net profit margin = Net profit

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