East Point Retail, Inc. sells apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands): Fiscal Year 3 Fiscal Year 2 Net income (loss) $151,500 $(78,000) Interest expense 3,100 11,700 Fiscal Year 3 Fiscal Year 2 Fiscal Year 1 Total assets (at end of fiscal year) $1,553,578 $1,477,794 $1,325,332 Total stockholders' equity (at end of fiscal year) 1,186,163 1,162,675 863,299 Assume the apparel industry average return on total assets is 5.0% and the average return on stockholders' equity is 8.0% for the year ended February 2, Year 3. a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to indicate a negative return on total assets. Fiscal Year 3 % Fiscal Year 2 % b. Determine the return on stockholders’ equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to indicate a negative return on stockholders' equity. Fiscal Year 3 % Fiscal Year 2 % c. In Fiscal Year 3, the return on stockholders' equity is greater than the return on total assets due to the positive use of leverage.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 51E: Juroe Company provided the following income statement for last year: Juroes balance sheet as of...

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Profitability Ratios

East Point Retail, Inc. sells apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands):


	Fiscal Year 3	Fiscal Year 2
Net income (loss)	$151,500	$(78,000)
Interest expense	3,100	11,700
	Fiscal Year 3	Fiscal Year 2	Fiscal Year 1
Total assets (at end of fiscal year)	$1,553,578	$1,477,794	$1,325,332
Total stockholders' equity (at end of fiscal year)	1,186,163	1,162,675	863,299

Assume the apparel industry average return on total assets is 5.0% and the average return on stockholders' equity is 8.0% for the year ended February 2, Year 3.

a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to indicate a negative return on total assets.

Fiscal Year 3	%
Fiscal Year 2	%

b. Determine the return on stockholders’ equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to indicate a negative return on stockholders' equity.

Fiscal Year 3	%
Fiscal Year 2	%

c. In Fiscal Year 3, the return on stockholders' equity is greater than the return on total assets due to the positive use of leverage.

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