The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. Balance Sheet (Millions of $) 2021 Assets Cash and securities $ 3,000 Accounts receivable 15,000 Inventories 18,000 Total current assets $ 36,000 Net plant and equipment 24,000 Total assets $ 60,000 Liabilities and Equity Accounts payable $ 15,004 Accruals 9,196 Notes payable 7,000 Total current liabilities $ 31,200 Long-term bonds 12,000 Total liabilities $ 43,200 Common stock 4,536 Retained earnings 12,264 Total common equity $ 16,800 Total liabilities and equity $ 60,000 Income Statement (Millions of $) 2021 Net sales $ 72,000 Operating costs except depreciation 66,960 Depreciation 1,920 Earnings before interest and taxes (EBIT) $ 3,120 Less interest 1,140 Earnings before taxes (EBT) $ 1,980 Taxes (25%) 495 Net income $ 1,485 Other data: Shares outstanding (millions) 500.00 Common dividends (millions of $) $519.75 Int. rate on notes payable & L-T bonds 6% Federal plus state income tax rate 25% Year-end stock price $35.64 What is the firm's ROA? Do not round your intermediate calculations. a. 4.13% b. 2.06% c. 2.47% d. 5.20% e. 3.30%

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter7: Receivables And Investments

Section: Chapter Questions

Problem 7.1DC: Reading 3M Companys Balance Sheet: Accounts Receivable The following current asset appears on the...

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The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

Balance Sheet (Millions of $)	2021
Assets
Cash and securities		$	3,000
Accounts receivable			15,000
Inventories			18,000
Total current assets		$	36,000
Net plant and equipment			24,000
Total assets		$	60,000

Liabilities and Equity
Accounts payable		$	15,004
Accruals			9,196
Notes payable			7,000
Total current liabilities		$	31,200
Long-term bonds			12,000
Total liabilities		$	43,200
Common stock			4,536
Retained earnings			12,264
Total common equity		$	16,800
Total liabilities and equity		$	60,000

Income Statement (Millions of $)	2021
Net sales		$	72,000
Operating costs except depreciation			66,960
Depreciation			1,920
Earnings before interest and taxes (EBIT)		$	3,120
Less interest			1,140
Earnings before taxes (EBT)		$	1,980
Taxes (25%)			495
Net income		$	1,485

Other data:
Shares outstanding (millions)			500.00
Common dividends (millions of $)		$519.75
Int. rate on notes payable & L-T bonds			6%
Federal plus state income tax rate			25%
Year-end stock price			$35.64

What is the firm's ROA? Do not round your intermediate calculations.

a. 4.13%

b. 2.06%

c. 2.47%

d. 5.20%

e. 3.30%

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