Question

In its 2020 annual report, Headlands Limited reports beginning-of-the-year total assets of $2,308 million, end-of-the-year total assets of $2,182 million, total revenue of $2,355 million, and net income of $150 million.

Calculate Headlands's asset turnover ratio. (Round answer to 2 decimal places, e.g. 52.75.)

Asset turnover ratio

enter Asset turnover ratio in times times

Link to Text

Calculate Headlands's profit margin. (Round answer to 2 decimal places, e.g. 52.75%.)

Profit margin

enter Profit margin in percentages %

Link to Text

Calculate Headlands’s rate of return on assets (1) using the asset turnover and profit margin, and (2) using net income. (Round answers to 2 decimal places, e.g. 52.75%.)

		Rate of return on assets
(1) Using the asset turnover and profit margin		enter percentages %
(2) Using net income		enter percentages %

Answer 1

Average total assets = [$2,308 million + $2,182 million] /2 = $4,490 million / 2

Average total assets = $2,245 million

Headland's Asset Turnover ratio = Net revenue / Average total assets = $2,355 million / $2,245 million

Headland's Asset Turnover ratio = 1.049 or

Headland's Asset Turnover ratio = 1.05 (rounded off to '2' decimals)

Profit margin = Net income / Net Revenue = $150 million / $2,355

Profit margin = 0.0637 or 6.37%

Profit margin = 6.37%.

Headland's rate of return on Assets

1) ROA = Asset turnover ratio * profit margin = 1.05 * 0.0637 = 0.0668

  ROA = 6.68%

2) ROA = Net income / Average total assets = $150 / $2,245 million = 6.68%