The Following Balance Sheets and Income Statements Are for Net

question 64

Essay

The following balance sheets and income statements are for Net Devices Inc.,a manufacturer of small electronic devices,including calculators,personal digital assistants and mp3 players.Use the information to calculate the following information:a.Compute the rate of return on assets for Net Devices for both 2011 and 2010.Disaggregate the rate of return on assets into the profit margin on ROA and asset turnover components.The income tax rate is 35%.
b.Calculate the accounts receivable turnover ratio for Net Devices for 2011 and 2010.All of the company's sales were made on account.
c.Calculate the inventory turnover ratio for Net Devices for 2011 and 2010.
d.Calculate the fixed assets turnover ratio for Net Devices for 2011 and 2010.
e.Calculate the rate of return on common shareholders' equity for Net Devices for 2011 and 2010.The amount of preferred dividends paid each year appear after the income statement.Calculate profit margin for ROCE.
f.Determine Net Devices capital structure leverage for 2011 and 2010.
g.Calculate Net Devices earnings per share for 2011 and 2010.

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Definitions:

Administrative Expense

Expenses related to the general operation of a business, including executive salaries, legal and professional fees, and office supplies.

Variable Cost

Costs that fluctuate in direct proportion to changes in levels of output or activity within a business.

Fixed Cost

Expenses that do not change in total over a certain range of activity levels or time periods, such as rent, salaries, and equipment leases.

Administrative Expense

Costs associated with the general administration of a business, including salaries of senior executives, legal and financial fees, and other general expenses.