Answer Happy

The CEO of Amylin Pharmaceuticals would like to increase ROE to meet the industry average of 12.5%; while, keeping net profit and asset turnover the same. What should he do to increase ROE? Actual 2019 0.8 Amylin Pharmaceuticals key ratios Industry average Actual 2018 1.5 0.68 1.24 50 64 13.2 10.4 37.70% 45.6% 5.6 7.8 8.60% 8.4% 2.4% 1.3% 3.7% 2.9% 12.5% 8.6% Current ratio Quick ratio Avg collection period (days) Inventory turnover Debt ratio Times interest earned Gross profit margin Net profit margin ROA ROE 1 Income statement Amylin Pharmaceuticals For the year ended 12/31/2019 Sales revenue Less: CGS Gross profits Less: Operating expenses Operating profits 200,000 87000 113,000 11000 102,000

Income statement Amylin Pharmaceuticals For the year ended 12/31/2019 Sales revenue Less: CGS Gross profits Less: Operating expenses Operating profits Less: Interest expense Net profits before taxes Less: Taxes (40%) Net profits after taxes 200,000 87000 113,000 11000 102,000 500 1,500 600 900 5000 8900 9350 23250 Balance sheet Amylin Pharmaceuticals 31-Dec-19 Cash A/R Inventories Total current assets Gross fixed assets $30,000 Less: Accumulated 13000 depreciation Net fixed assets Total assets Liabilities & Stockholders' equity Account payable Accruals Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities & stockholders equity $17,000 40250 9000 6675 15675 8375 24050 1000 15200 16200 40250

Decrease total debt Issue more common equities O Repurchase common equity Improve the efficiency of the operation and thus decrease all expenses