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Return on stockholder equity

5. Omni Technology Holding Company has the following three affiliates:
Personal International
Software Computers Operations
Sales $40,000,000 $60,000,000 $100,000,000
Net Income (after tax) 2,000,000 2,000,000 8,000,000
Assets 5,000,000 25,000,000 60,000,000
Stockholder equity 4,000,000 10,000,000 50,000,000

a) Which affiliate has the highest return on sales?
b) Which affiliate has the lowest return on assets? Explain why.
c) Which affiliate has the highest total asset turnover?
d) Which affiliate has the highest return on stockholder equity?
e) Which affiliate has the highest debt ratio? (assets minus stockholder equity = debt)

Solution Preview

See attached file.

Software Computer Operations
Return on Sales 5.00% 3.33% 8.00%

Return on Assets 40.00% 8.00% 13.33%

Total Asset Turnover 8.00 2.40 1.67

Return on Stockholder equity 50.00% 20.00% 16.00%

Debt ...

Solution Summary

This provides the steps to calculate the return on stockholder equity and other ratios