Author Question: Blue Angel, Inc generated sales of 420,000 in the year 2014. The accountant provided the ... (Read 48 times)

lilldybug07 · **on:** Jul 6, 2018

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 · **Reply #1 on:** Jul 6, 2018

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