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RATIO CALCULATIONS Assume the following relationships for the Caulder Corp.:

>>>>
Sales / Total Assets = 1.2X
Total Assets = Sales / 1.2X = 0.83333333X
Return on Assets (ROA) = Net Income / Total Assets
5% = Net Income / 0.8333333X
Net income = 0.04166667X
Profit Margin = 0.04166667X / 1.2X
= 0.03472223
= 3.472223%
Therefore, Profit Margin is 3.47%
>>>>
Return on Equity = Net Income / Equity
15% = 0.04166667X / Equity
Equity = 0.27777778X
Total Assets = Equity + Debt
1.2X = 0.27777778X + Debt
Debt = 0.92222222X
Debt / Equity = 0.92222222X / 0.27777778X
= 3.31999997
Therefore Debt to Equity ratio is 3.32
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