In millions of dollars A B C D
Sales $250 $10 $15 $25
Net Income after tax 3 0.5 2.25 3
Total Assets 15 7.5 15 24
Stockholders' equity 10 5.0 14 10
Which firms are having problems, what corrective action could be suggested for the poorer performing firm and what additional data should I have on hand when conducting my analysis?
Asset turnover = sales/total assets
A = 250/15=16.67
B = 10/7.5=1.33
C = 15/15=1
Net profit margin = net income after tax/sales
A = 3/250=0.012
B = .5/10=0.05
C = 2.25/15=.15
Equity multiplier = total assets/stockholders' equity
A = 15/10=1.5
B = ...
This solution shows step-by-step calculations to determine asset turnover, net profit margin, equity multiplier, return of equity as well as a recommendation on how to improve poorer performing firms.