exercise 4 - 27 (algo) profitability ratios lo4 - 10\nthe following condensed information was reported by…

exercise 4 - 27 (algo) profitability ratios lo4 - 10\nthe following condensed information was reported by peabody toys, incorporated, for 2027 and 2026\n(\\$ in thousands)\n| |2027|2026|\n|--|--|--|\n|income statement information|\n|net sales|$ 5,600|$ 4,600|\n|net income|294|112|\n|balance - sheet information|\n|current assets|$ 840|$ 700|\n|property, plant, and equipment (net)|1,460|1,110|\n|total assets|$ 2,300|$ 1,900|\n|current liabilities|$ 1,020|$ 670|\n|long - term liabilities|790|790|\n|common stock|300|300|\n|retained earnings|190|140|\n|liabilities and shareholders equity|$ 2,300|$ 1,900|\nrequired:\n1. determine the following ratios for 2027\nnote: round your percentage answers to 1 decimal place.\n2. determine the amount of dividends paid to shareholders during 2027\nnote: enter your answers in whole dollars, not in thousands. for example, $150,000 rather than 150.\n1a profit margin on sales\n1b return on assets\n1c return on equity\n2 dividends paid

exercise 4 - 27 (algo) profitability ratios lo4 - 10\nthe following condensed information was reported by peabody toys, incorporated, for 2027 and 2026\n(\\$ in thousands)\n| |2027|2026|\n|--|--|--|\n|income statement information|\n|net sales|$ 5,600|$ 4,600|\n|net income|294|112|\n|balance - sheet information|\n|current assets|$ 840|$ 700|\n|property, plant, and equipment (net)|1,460|1,110|\n|total assets|$ 2,300|$ 1,900|\n|current liabilities|$ 1,020|$ 670|\n|long - term liabilities|790|790|\n|common stock|300|300|\n|retained earnings|190|140|\n|liabilities and shareholders equity|$ 2,300|$ 1,900|\nrequired:\n1. determine the following ratios for 2027\nnote: round your percentage answers to 1 decimal place.\n2. determine the amount of dividends paid to shareholders during 2027\nnote: enter your answers in whole dollars, not in thousands. for example, $150,000 rather than 150.\n1a profit margin on sales\n1b return on assets\n1c return on equity\n2 dividends paid

Answer

Explanation:

Step1: Calculate profit margin on sales

Profit margin on sales = $\frac{Net\ Income}{Net\ Sales}\times100%$. In 2027, net income is $294,000 and net sales is $5,600,000. So, $\frac{294000}{5600000}\times 100% = 5.25% \approx 5.3%$.

Step2: Calculate return on assets

Return on assets = $\frac{Net\ Income}{Average\ Total\ Assets}\times100%$. Since we only have end - of - year values, we'll use the 2027 total assets value of $2,300,000. So, $\frac{294000}{2300000}\times 100% \approx 12.8%$.

Step3: Calculate return on equity

First, calculate shareholders' equity in 2027. Shareholders' equity = Total assets - Total liabilities. Total liabilities = Current liabilities+Long - term liabilities = $1020000 + 790000=1810000$. Shareholders' equity = $2300000 - 1810000 = 490000$. Return on equity = $\frac{Net\ Income}{Shareholders'\ Equity}\times100%=\frac{294000}{490000}\times 100% = 60.0%$.

Step4: Calculate dividends paid

The change in retained earnings is related to net income and dividends. Change in retained earnings = Net income - Dividends. Retained earnings in 2026 is $140000 and in 2027 is $190000. Net income in 2027 is $294000. So, $190000-140000=294000 - Dividends$. Solving for dividends: Dividends = $294000-(190000 - 140000)=244000$.

Answer:

1a. 5.3% 1b. 12.8% 1c. 60.0% 2. $244,000