Bootstrap Computer Company reported the following summary information in its annual report.
|
2004 |
|
|
Sales |
$27,000 |
|
Net income |
5,049 |
|
Total assets |
60,108 |
|
Stockholders’ equity |
40,070 |
|
Fixed assets |
25,000 |
|
Income before interest & taxes |
10,278 |
|
Interest expense |
2,500 |
a. Compute each of the following ratios:
i. Profit margin
ii. Asset turnover
iii. Return on assets
iv. Return on equity
v. Fixed asset turnover
vi. Times interest earned
b. Explain how the return on equity measure includes information about all three activities in the transformation process.