The following statement of ﬁnancial position and statement of comprehensive income should be used. Woodburn, Inc. has a proﬁt margin of _____ %, a total asset turnover of _____, an equity multiplier
Of _____, and a return on equity of _____ %. (Use 2015 values.)
A) 16.97%; .93; .60; 9.48%
B) 16.97%; 1.07; 1.68; 30.52%
C) 18.89%; 1.21; 1.73; 39.56%
D) 18.89%; 1.07; 1.68; 33.94%

Question

The following statement of ﬁnancial position and statement of comprehensive income should be used.    Woodburn, Inc. has a proﬁt margin of _____ %, a total asset turnover of _____, an equity multiplier
Of _____, and a return on equity of _____ %. (Use 2015 values.)
A) 16.97%; .93; .60; 9.48% 
B) 16.97%; 1.07; 1.68; 30.52% 
C) 18.89%; 1.21; 1.73; 39.56% 
D) 18.89%; 1.07; 1.68; 33.94%

Quizplus · Accepted Answer

To calculate the proﬁt margin, we need to divide net income by total revenue. 
Net income = $74,400
Total revenue = $887,400
Proﬁt margin = (74,400/887,400) x 100 = 8.4%

Total asset turnover = revenue/total assets
Total assets = $2,239,500
Total asset turnover = 887,400/2,239,500 = 0.396

Equity multiplier = total assets/total equity
Total equity = $1,207,750
Equity multiplier = 2,239,500/1,207,750 = 1.85

Return on equity = net income/total equity
Return on equity = 74,400/1,207,750 = 6.15%

Therefore, the answer is D, which is 18.89% for proﬁt margin, 1.07 for total asset turnover, 1.68 for equity multiplier, and 33.94% for return on equity.

The Following Statement of ﬁNancial Position and Statement of Comprehensive