Summary Business Accounting

Question:

The 2013 income statement for Anderson TV and Appliance reported sales revenue of $420,000 and net

income of $65,000.Average total assets for 2013 was $800,000. Shareholders’ equity at the beginning of

the year was $500,000 and $20,000 was paid to shareholders as dividends. There were no other

shareholders’ equity transactions that occurred during the year. Calculate the profit margin on sales,

return on assets, and return on shareholders’ equity for 2013.



Answer:



Profit margin = Net income

Sales

= $65,000

$420,000

= 15.5%




Return on assets = Net income

Average total assets

= $65,000

$800,000

= 8.1%




Return on shareholders’

equity = Net income

Average shareholders’ equity