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21. Follies bookstore, the only bookstore close to campus, had a net income in 2003 of \$90,000. Here are some of the ratios from the annual report.

Profit Margin: 12%
Return on Investment: 20%
Debt to Asset Ratio: 55%

Using these ratios, calculate the following for Follies Bookstore:

a. Sales

b. Total Assets

c. Total Asset Turnover

d. Total Debt

e. Stockholder's Equity

f. Return on Equity

22. Electro Wizard Company produces a popular video game called Destructo, which sells for \$32. Last year Electro Wizard sold 50,000 Destructo games each of which costs \$6 to produce. Electro Wizard incurred selling and administrative expenses of \$80,000 and depreciation expense of \$10,000. In addition, Electro Wizard has a \$100,000 loan outstanding at 12%. Their tax rate is 40%. There are 100,000 common shares outstanding.

Prepare an income statement for Electro Wizard in good form (includes EPS)

Electro Wizard Company
Income Statement
For year ending 12/31/20..

Sales
Less COGS
Gross Profit
Less Operating Expenses

Operating Profit (EBIT)
Less Interest Expense
Earnings Before Taxes
Less Taxes
Net Income

Common Shares
Earnings Per Share

#### Solution Preview

21. Follies bookstore, the only bookstore close to campus, had a net income in 2003 of \$90,000. Here are some of the ratios from the annual report.

Profit Margin: 12%
Return on Investment: 20%
Debt to Asset Ratio: 55%

Using these ratios, calculate the following for Follies Bookstore:

a. Sales 90,000 / .12 = \$750,000

b. Total Assets 90,000 / .20 = \$450,000

c. Total Asset Turnover ...

#### Solution Summary

a. Sales

b. Total Assets

c. Total Asset Turnover

d. Total Debt

e. Stockholder's Equity

f. Return on Equity

\$2.49