For the year ended December 31, 2010, Ebanks, Inc., earned an ROI of 1

QUESTION

For the year ended December 31, 2010, Ebanks, Inc., earned an ROI of 12%. Sales for the year were $96 million, and average asset turnover was 2.4. Average owners equity was $32 million.Required:a. Calculate Ebanks, Inc.s margin and net income.b. Calculate Ebanks, Inc.s return on equity.
Answer A Average Asset Turnover = Sales/Average Assets 2.4 = $ 96 million/Average Assets Average Assets = $ 40 million ROI = Net Income/Average Assets 12% = Net Income/$ 40 million Net Income = $ 4.80 million Margin % = Net Income/ Sales Margin % = $

4.80 million/$ 96 million Margin % = 5 % Answer B Return on Equity = Net Income/Equity * 100 Return on Equity = $ 4.80 million/$ 32 million * 100 Return on Equity = 15%

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