Question

1. Firm A has a margin of 13%, sales of $630,000, and ROI of 18%. Calculate the firm's average total assets.
2. Firm B has net income of $76,000, turnover of 1.20, and average total assets of $860,000. Calculate the firm's sales, margin, and ROI.
3. Firm C has net income of $134,000, turnover of 1.91, and ROI of 23.90%. Calculate the firm's margin, sales, and average total assets.

Answer 1

Firm A:

Sales = 630000

Margin = 13% of 630000 = 81900

ROI = Net Income / Average total assets

18% = 81900 / Average total assets

Average total assets = 455000

Firm B:

Net Income = 76000

Turnover ratio = 1.2

Average total assets = 860000

Asset turnover ratio = Sales / average total assets

1.2 = Sales / 860000

Sales = 860000 * 1.2 = 1032000

Margin = 76000 / 1032000 = 7.36%

ROI = 76000 / 860000 = 8.84%

Firm C:

Net income = 134000

Turnover ratio = 1.91

ROI = 23.9%

ROI = Net income / average total assets

23.9% = 134000 / average total assets

average total assets = 134000 / 23.9%

Average total assets = 560669

Asset turnover ratio = Sales / average total assets

1.91 = Sales / 560669

Sales = 560669 * 1.91 = 1070878

Margin = Net income / Sales

Margin = 134000 / 1070878 = 12.51%