Bethesda Mining Company reports the following balance sheet information for 2013 and 2014. BETHESDA MINING COMPANY Balance Sheets as of December 31, 2013 and 2014 2013 2014 2013 2014 Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 26,530 $ 34,778 Accounts payable $ 194,422 $ 202,111 Accounts receivable 57,781 78,139 Notes payable 89,520 141,088 Inventory 134,324 201,260 Total $ 283,942 $ 343,199 Total $ 218,635 $ 314,177 Long-term debt $ 246,000 $ 182,750 Owners’ equity Common stock and paid-in surplus $ 209,000 $ 209,000 Accumulated retained earnings 136,940 168,456 Fixed assets Net plant and equipment $ 657,247 $ 589,228 Total $ 345,940 $ 377,456 Total assets $ 875,882 $ 903,405 Total liabilities and owners’ equity $ 875,882 $ 903,405 Suppose that the Bethesda Mining Company had sales of $2,166,873 and net income of $108,381 for the year ending December 31, 2014. Required: Calculate ROE using the Du Pont identity. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16). Enter the profit margin and return on equity as percents.) Profit margin % Total asset turnover times Equity multiplier times Return on equity % Explanation: Profit margin = Net income / Sales = $108,381 / $2,166,873 = 0.0500 or 5.00% Total asset turnover = Sales / Total assets = $2,166,873 / $903,405 = 2.40 Equity multiplier = Total assets / Total equity = $903,405 / $377,456 = 2.39 Using the Du Pont identity to calculate ROE, we get: ROE = (Profit margin)(Total asset turnover)(Equity multiplier) ROE = (0.0500)(2.40)(2.39) ROE = 0.2871 or 28.71%

Bethesda Mining Company reports the following balance sheet information for 2013 and 2014.

BETHESDA MINING COMPANY Balance Sheets as of December 31, 2013 and 2014
		2013			2014				2013			2014
Assets							Liabilities and Owners’ Equity
Current assets							Current liabilities
Cash	$	26,530		$	34,778		Accounts payable	$	194,422		$	202,111
Accounts receivable		57,781			78,139		Notes payable		89,520			141,088
Inventory		134,324			201,260
							Total	$	283,942		$	343,199
Total	$	218,635		$	314,177
							Long-term debt	$	246,000		$	182,750
							Owners’ equity
							Common stock and paid-in surplus	$	209,000		$	209,000
							Accumulated retained earnings		136,940			168,456
Fixed assets
Net plant and equipment	$	657,247		$	589,228		Total	$	345,940		$	377,456
Total assets	$	875,882		$	903,405		Total liabilities and owners’ equity	$	875,882		$	903,405

Suppose that the Bethesda Mining Company had sales of $2,166,873 and net income of $108,381 for the year ending December 31, 2014.

Required:

Calculate ROE using the Du Pont identity. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16). Enter the profit margin and return on equity as percents.)

Profit margin		%
Total asset turnover		times
Equity multiplier		times
Return on equity		%

Explanation:

Profit margin	= Net income / Sales
	= $108,381 / $2,166,873
	= 0.0500 or 5.00%
Total asset turnover	= Sales / Total assets
	= $2,166,873 / $903,405
	= 2.40
Equity multiplier	= Total assets / Total equity
	= $903,405 / $377,456
	= 2.39

Using the Du Pont identity to calculate ROE, we get:

ROE	=	(Profit margin)(Total asset turnover)(Equity multiplier)
ROE	=	(0.0500)(2.40)(2.39)
ROE	=	0.2871 or 28.71%