Galaxy United Inc 2009 Income Statement in millions Net Sal

Galaxy United, Inc

2009 Income Statement

($ in millions)

Net Sales $8,550

Less: Cost of goods sold 7,180

Less: Depresiation 410   

Earnings before interest & taxes 960

Less: Interest paid 77

Taxable Income 883

Less: taxes 309

Net Income $574

Galaxy United , Inc.

2008 & 2009 Balance Sheets

($ in millions)

2008 2009 2008 2009

Cash $ 120 $ 150 Accounts Payable $1,110 $1,130

Accounts Rec 950 780 Long-term debt 920 1,227

Inventory 1,470 1,510 Common stock $3,130 $2,930

Sub-Total $2,540 $2,440 Retained earnings 530 803

Net fixed assets 3,150 3,650

Total assets $5,690 $6,090 Total liab & equity $5,690 $6,090

What is the return on equtiy for 2009?

A) 10 percent

B) 13 percent

C) 16 percent

D) 18 percent

E) 15 percent

Solution

Average Shareholders Equity Opening+ Closing/2 Opening 3130+530 3660 Closing 2930+803 3733 Average Shareholders Equity 3660+3733/2 3696.5 Return on Equity Net Income/ Average Shareholders Equity 574/3696.5 0.155282 Return On Equity 16% The correct answer is C) 16 Percent