contestada

Easter Egg and Poultry Company has $2,000,000 in assets and $1,400,000 of debt. It reports net income of $200,000.

Required:
a. What is the firm's return on assets?
b. What is its return on stockholders' equity?
c. If the firm has an asset turnover ratio of 2.5 times, what is the profit margin (return on sales)?

Respuesta :

Parrain

Answer:

a. Return on assets

= Net income / Total assets

= 200,000 / 2,000,000

= 10%

b. Return on Equity:

First find leverage ratio = Debt / Assets

= 1,400,000 / 2,000,000

= 70%

ROE = Return on Assets / (1 - Leverage ratio)

= 10% / (1 - 70%)

= 33.3%

c. Return on sales = Net income / Sales

Asset Turnover = Sales / Total assets

2.5 = Sales / 2,000,000

Sales = 2.5 * 2,000,000

= $5,000,000

Return on sales = 200,000 / 5,000,000

= 4.0%

Otras preguntas