Estaibans Taco Shack Current Income Statement Gross Sales 43

Estaiban?s Taco Shack

Current Income Statement

Gross Sales                                         $430,000                     100%

Ret/Allowances                                       20,000                         5%

Net Sales                                             $410,000                     95%

Cost of Goods Sold                            $150,500                      35%

Gross Profit                                        $259,500                      60%

Operating Expenses

            Payroll                                              $103,200                     24%

            Rent                                            50,100                        11%

            Debt Service                                21,500                         5%

            Advertising                                 12,900                         3 %

            Insurance                                       8,600                         2%

            Maintenance                                 8,600                         2%

            Total Op Exp                        $204,900                       47%

Earnings Before Taxes (EBT)           $ 54,600                          13 %           

Estaiban?s Taco Shack

Current Balance Sheet

Assets                                                                         Liabilities                                         

Current Assets                                                            Current Liabilities

            Cash                            $30,300 Payroll Payable $7,000

            Inventory                    $25,100 Taxes Payable $9,000

            A/R                             $ 4,100 A/P $21,400

Total                                       $59,500 S/T Loan $3,700

Total $41,100

                                                                           Fixed Liabilities

Fixed Assets Mortgage $85,000

            Land                             $135,000 L/T Loan $ 14,500

            Buildings                      $ 72,000 Total                          $99,500

            Fixtures                        $ 20,700 Total Liabilities       $140,600

            Equipment                   $ 35,700        Net Worth $182,300

Total                                       $263,400 Liabilities + Net Worth $322,900

Total Assets                           $322,900

ACTUAL QUESTION: Profitability Ratios: EBT = _13___%, ROA = ______%, RONW = ______%

Could you please break down how to get the ROA and the RONW seeing as I\'m confused how to get this answer.

Solution

1)

ROA = Net Income / Total asset

ROA = 54600/322900

ROA = 16.91%

ROA = 17% approx

2)

RONW = Net Income/Net Worth

RONW = 54600/182300

RONW = 29.95%

RONW = 30% approx

Note : Net Income = EBT - Tax expenses,

Assuming no tax expenses