LP 2 Assignment

Chapter 3

2. Database Systems is considering expansion into a new product line. Assets to support expansion will cost $500,000. It is estimated that Database can generate $1,200,000 in annual sales, with 6 percent profit margin. What would net income and return on assets (investment) be for the year?

8. Neon Light Company has $1,000,000 in assets and $600,000 of debt. It reports net income of $100,000.

a.) What is the return on the assets?

b.) What is the return on the stockholders’ equity?

c.) If the firm has an asset turnover ratio of 3 times, what is the profit margin (return on sales)?

22. The balance sheet for the Bryan Corporation is shown below. Sales for the year were $3,040,000, with 75 percent of sales sold on credit.

Compute the following ratios:

a.) Current ratio.

b.) Quick ratio.

c.) Debt-to-total-assets ratio.

d.) Asset turnover.

e.) Average collection period.