Question

​Ladders, Inc. has a net profit margin of

5.3 %5.3%

on sales of

$ 50.8$50.8

million. It has book value of equity of

$ 38.7$38.7

million and total book liabilities of

$ 29.8$29.8

million. What is​Ladders' ROE?​ ROA? Note: Assume the value of Interest Expense is equal to zero.

Answer 1

Ans: Given Data, Net profit margin = 5.3%

Sales = $ 50.8 million

Book value of Equity = $ 38.7 million

Book liabilities = $ 29.8 million

1. Total assets = Book value of equity + Book value of liabilities

= $ 38.7 million + $ 29.8 million.

= $ 68.5 million.

2. Net Profit margin = Net Profit / Sales

5.3% = Net Profit / Sales

Net profit = Sales * 5.3%

= $ 50.8 million * 5.3 %

= $ 2.6924 million

3. ROE = Net Profit / Book value of Equity

= $ 2.6924 million / $38.7 million (From 2 and given data)

= 6.96 %

4. ROA = Net profit / total assets

= $ 2.6924 / $ 68.5 million

= 3.93 %