Question

**Profit Margin and Debt Ratio**

Assume you are given the following relationships for the Haslam Corporation:

Sales/total assets | 1.3 |

Return on assets (ROA) | 4% |

Return on equity (ROE) | 5% |

Calculate Haslam's profit margin and liabilities-to-assets ratio. Do not round intermediate calculations. Round your answers to two decimal places.

Profit margin: %

Liabilities-to-assets ratio: %

Suppose half of its liabilities are in the form of debt. Calculate the debt-to-assets ratio. Do not round intermediate calculations. Round your answer to two decimal places.

%

Answer #1

Answer a.

Total Asset Turnover = Sales / Total Assets

Total Asset Turnover = 1.30

Return on Assets = Profit Margin * Total Asset Turnover

4.00% = Profit Margin * 1.30

Profit Margin = 3.08%

Return on Equity = Return on Assets * Equity Multiplier

5.00% = 4.00% * Equity Multiplier

Equity Multiplier = 1.25

Equity Multiplier = Total Assets / Total Equity

1.25 = Total Assets / Total Equity

Total Equity / Total Assets = 0.80

Equity-to-Assets Ratio = 0.80

Liabilities-to-Assets Ratio = 1 - Equity-to-Assets Ratio

Liabilities-to-Assets Ratio = 1 - 0.80

Liabilities-to-Assets Ratio = 0.20 or 20.00%

Answer b.

Debt-to-Assets Ratio = (1/2) * Liabilities-to-Assets Ratio

Debt-to-Assets Ratio = (1/2) * 0.20

Debt-to-Assets Ratio = 0.10 or 10.00%

Assume you are given the following relationships for the Haslam
Corporation:
Sales/total assets
1.6
Return on assets (ROA)
3%
Return on equity (ROE)
5%
Calculate Haslam's profit margin and liabilities-to-assets
ratio. Do not round intermediate calculations. Round your answers
to two decimal places.
Profit margin: %
Liabilities-to-assets ratio: %
Suppose half of its liabilities are in the form of debt.
Calculate the debt-to-assets ratio. Do not round intermediate
calculations. Round your answer to two decimal places.
%

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Return on equity (ROE) 5% Calculate Haslam's profit margin and
liabilities-to-assets ratio. Do not round intermediate
calculations. Round your answers to two decimal places. Profit
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Suppose half of its liabilities are in the form of debt.
Calculate the debt-to-assets ratio. Do not round intermediate
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Sales/total assets
2.4
Return on assets (ROA)
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Return on equity (ROE)
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Calculate Haslam's profit margin. Do not round intermediate
calculations. Round your answer to two decimal places.
%
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intermediate calculations. Round your answer to two decimal
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%
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Assume the following relationships for the Caulder Corp.:
Sales/Total assets
1.9×
Return on assets (ROA)
4.0%
Return on equity (ROE)
9.0%
Calculate Caulder's profit margin and debt-to-capital ratio
assuming the firm uses only debt and common equity, so total assets
equal total invested capital. Do not round intermediate
calculations. Round your answers to two decimal places.
Profit margin: ? %
Debt-to-capital ratio: ?%

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Sales/Total assets
2.1×
Return on assets (ROA)
8.0%
Return on equity (ROE)
14.0%
Calculate Caulder's profit margin and debt-to-capital ratio
assuming the firm uses only debt and common equity, so total assets
equal total invested capital. Do not round intermediate
calculations. Round your answers to two decimal places.
Profit margin: %
Debt-to-capital ratio: %

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Assume the following relationships for the Caulder Corp.:
Sales/Total assets
1.2x
Return on assets (ROA)
5%
Return on equity (ROE)
15%
Calculate Caulder's profit margin assuming the firm uses only
debt and common equity, so total assets equal total invested
capital. Round your answer to two decimal places.
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uses only debt and common equity, so total assets equal total
invested capital. Round...

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Assume the following relationships for the Brauer Corp.:
Sales total assets 1.5x
Return on assets (ROA) 3%
Return on equity (ROE) 5%
Calculate Brauer's profit margin and debt ratio.

Assume the following relationships for the Caulder Corp.:
Sales/Total assets
2.2x
Return on assets (ROA)
3%
Return on equity (ROE)
9%
Calculate Caulder's profit margin assuming the firm uses only
debt and common equity, so total assets equal total invested
capital. Round your answer to two decimal places.
%
Calculate Caulder's debt-to-capital ratio assuming the firm
uses only debt and common equity, so total assets equal total
invested capital. Round your answer to two decimal places.
%

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Sales/Total assets
2.1x
Return on assets (ROA)
4%
Return on equity (ROE)
15%
Calculate Caulder's profit margin assuming the firm uses only
debt and common equity, so total assets equal total invested
capital. Round your answer to two decimal places.
%
Calculate Caulder's debt-to-capital ratio assuming the firm
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Sales/Total assets
1.4x
Return on assets (ROA)
7%
Return on equity (ROE)
15%
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debt and common equity, so total assets equal total invested
capital. Round your answer to two decimal places.
b. Calculate Caulder's debt-to-capital ratio assuming the firm
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invested capital. Round your answer to two decimal places.

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