1.

ROE = 12%
Leverage ratio = 1.5
Asset turnover =2.0
Rev=1mil
NI=?

ROE=Net profit margin*Asset turnover*Leverage

12%=NI/1mil * 2 * 1.5
 NI=40,000

2. Rev=2700
A=1310
D/E=1.2 =>A/E=2.2
ROE=15%
NI=?

ROE=ROA* Leverage
15%=NI/1310 * 2.2
NI=89.32

3. Same as Ex2

4. D/E=0.8
ROA=9.7%
E=735000

Equity multiplier=18/10=1.8
ROE=ROA*Levrage=9.7%* 18/10 = 17.46%
NI=ROA*Asset=9.7%*(735000/10*18)=128331

5. Long term L/A=0.35

CA/CL=1.25
CL=950
Rev=5780
NI/Rev=9.4%
ROE=18.2%
Long-term A=?

CA=1.25*950=1187.5
ROE=NI/E=18.2%
NI=E*18.2%
NI/Rev=9.4%=E*18.2%/5780
E=2985.27
CA+LA=CL+LL+E
 1187.5+LA=950+0.35*(1187.5+LA)+2985.27
1187.5 + LA = 950 +2985.27 + 415.625 + 0.35*LA
0.65*LA=3163.395
LA=4866.76

6. CL=365000
(CA-Inventory)/CL=0.85
Inventory turnover=5.82
CA/CL=1.4
COGS=?

CA-Inventory=0.85*365000=310250
CA=1.4*365000=511000
Inventory=511000-310250=200750
Inventory turnover=COGS/Int
COGS=Inventory turnover*Inventory=5.82*200750=1168365

7. Rev=100%
COGS=60%
Gross profit=40%

2017
Q=250,000,000 units
P=1$/unit

2018
P=0.9$/unit
Q=500,000,000 units
Gross profit=?

2017
Rev=250mil
COGS=0.6*250mil=150mil
COGS/unit=150mil/250mil=0.6mil/unit
Gross profit=0.4*250mil=100mil

2018
Rev=0.9*500mil=450mil
COGS=COGS/unit of 2017*Q of 2018= 0.6*500mil=300mil
Gross profit=450mil-300mil=150mil
Change in gross profit=150mil-100mil=50mil