Question

Dearborn Supplies has total sales of $204 million, assets of $104 million, a return on equity of 30 percent, and a net profit margin of 7.8 percent. What is the firm's debt ratio?

Answer 1

Ans.	*Calculations for Net income :
	Net income = Sales * Net profit margin
	$204,000,000 * 7.8%
	$15,912,000
	*Calculations for Total equity :
	Total equity = Net income / Return on equity
	$15,912,000 * 30%
	$4,773,600
	*Calculations for Total debt :
	Total debt = Total assets - Total equity
	$104,000,000 - $4,773,600
	$99,226,400
	*Calcualtions for Debt ratio :
	Debt ratio = Total debt / Total assets * 100
	$99,226,400 / $104,000,000 * 100
	95.41%