1) Gas Stations, Inc., expects sales to rise from $1,660,000 to $1,860,000 next year. Mr. John considers that net assets (Assets – Liabilities) will symbolize 65 percent of sales. His firm has 8 percent return on sales and pays 20 percent of profits out as dividends.
(a) What result will this growth have on the funds? (Negative amount must be indicated by the minus sign.)
(b) If dividend payout is only 10 percent, what result will this growth have on the funds?
2) The Classic Group has equity of $421,000, sales of $792,000, and the profit margin of 6 percent. Determine the return on equity?
i) 8.87 percent
ii) 6.19 percent
iii) 11.29 percent
iv) 10.27 percent
v) 9.37 percent