Problem: The following information is from the 2011 annual report of Weber Corporation, a company that supplies manufactured parts to the household appliance industry.
Average interest - bearing debt 20,000,000
Average other liabilities 2,250,000
Average shareholders' equity 12,250,000
Sales 49,000,000
Interest expense 800,000
Net income 2,450,000
Q1. Compute Weber Corporation's return on assets (ROA) for 2011 using a combined federal and state income tax rate of 40% where needed.
Q2. Compute the profit margin and asset turnover components of ROA for 2011.
Q3. Weber's management believes that various business initiatives will produce an asset turn-over rate of 2.25 next year. If the profit margin next year is unchanged from 2011, what will be the company's ROA?