S&J Plumbing, Inc.'s 2010 income statement shows a net profit before tax of $468, whereas the...

Question

S&J Plumbing, Inc.'s 2010 income statement shows a net profit before tax of $468, whereas the balance
sheet that the company's equity for the fiscal year-end 2010 is $1,746.
• Calculate the company's return on equity and explain whether the managers are providing a
good return on the capital provided by the company’s shareholders.
• Diagram and explain the operating cycle of a service company.

fa-unit-4-pyrge1ey-e4b4rxiv.pdf

Angel K · Accepted Answer

S & J PLUMBINGS
RATIO ANALYSIS
RETURN ON EQUITY
Return on equity		=	
				=	
				=	.27 or 27%
Ratio analysis is a most common quantitative technique used by the users of a financial statement to assess the performance, efficiency, liquidity and solvency of a company. Among these various tools Return on equity ratio is a common analysis conducted to analyze the return the shareholder’s derive on their investment in the company. It is calculated by dividing the net income earned by the company during a particular period of time by the shareholder’s equity.

S&J Plumbing, Inc.'s 2010 income statement shows a net profit before tax of $468, whereas the balance sheet that the company's equity for the fiscal year-end 2010 is $1,746. • Calculate the company's...

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