Blue Angel, Inc generated sales of 420,000 in the year 2014. ...

[lilldybug07]

Blue Angel, Inc generated sales of 420,000 in the year 2014.
 
  The accountant provided the following additional information:
 
  Net profit margin 3
  Total Shareholder's equity 112,000
  Total assets 280,000
 
  Using the DuPont model, calculate the return on equity of the company.
  A) 1.8
  B) 5
  C) 11.25
  D) 0.8

Question 2

A credit signifies increases in liabilities, capital, and revenue, and decreases in assets, drawing, and expenses.
  Indicate whether the statement is true or false

[Christopher]

Answer to Question 1

C
Explanation: C) In the DuPont Model, ROE is broken down into three component ratios: net profit margin, total asset turnover, and the equity multiplier.
ROE = (Net income/Sales)  (Sales/ Total assets)  (Total assets/Total shareholders' equity)
ROE = 0.03  (420,000/ 280,000 )  (280,000/112,000 )

Answer to Question 2

T

[lilldybug07]

Excellent

[tkempin]

TYSM