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Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Question
Required: Evaluate the performance of RBL Paving Company using the below ratios. Define each ratio, perform the calculation, and provide an explanation of the result.
a. Return on equity
b.Total assets turnover
c. Return on assets
d. Current ratio
e. Receivables turnover

Transcribed Image Text:There was a bit of concern about one of RBL's newer entities - RBL Paving Company.
Management wants you to review the two financial statements below and give your
analysis of the company's performance.
RBL Paving Company
Current Assets:
Cash
Assets
Accounts Receivable
Inventory
Total Current Assets
Fixed Assets:
Property, Plant & Equipment
Less: Accumulated Depreciation
Net Fixed Assets
Total Assets
Current Liabilities:
Accounts Payable
200,000
300,000 Notes Payable
800,000
1,300,000 Total Current Liabilities
2,200,000
600,000 Capital Surplus
1,600,000 Retained Earnings
2,900,000
Liabilities
Owners' Equity:
Common Stock ($1 Par)
Dividends
Addition to Retained Earnings
Total Owners' Equity
Total Liabilities and Owners'
Equity
RBL Paving Company
Income Statement for Year Ending December 31, 2021
Sales
Less: Cost of Goods Sold
Less: Administrative Expenses
Less Depreciation
Earnings Before Interest and Taxes
Less: Interest Expense
Taxable Income
Less: Taxes
Net Income
3,400,000
2,700,000
700,000
682,000
(682,000)
120,000
(802,000)
(280.000)
(522,000)
0
(522,000)
700,000
600,000
1,300,000
600,000
100,000
100,000
800,000
2,900,000
Expert Solution
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Step 1: Definition
VIEW Step 2: Calculation of Return on equity (ROE) & Interpretation
VIEW Step 3: Calculation of Total Assets Turnover & Interpretation
VIEW Step 4: Calculation of Return on Assets (ROA) & Interpretation
VIEW Step 5: Calculation of Current Ratio & Interpretation
VIEW Step 6: Calculation of Receivables Turnover & Interpretation
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