Question

**Problem TWO:**

**Total Asset Turnover (TAT) 3.0xx**

**Return on Assets (ROA) 9.0000%**

**Return on Equity (ROE) 12.0000%**

**Find:**

**Profit Margin:**

**Debt Ratio:**

Answer #1

Profit margin = Return On Assets / Total asset turnover

= 9% / 3.00

= 3%

ROE = Profit margin * Asset turnover * Financial multiplier

12% = 3% * 3.00 * Financial Multiplier

Financial Multiplier = 12 / 9

= 1.333

Financial Multiplier = Total assets / Equity

If the financial multiplier = 1.333 this means that total assets = 1.333 and total equity = 1

We know that total assets = Equity + Debt

1.33 = 1 + Debt

Debt = 0.33

Debt ratio = Total debt / Assets

= 0.333 / 1.333

= 25%

Compostela Ltd. has an ROA of 9% and
an ROE of 15%. Its total asset turnover is 1.5x. What is
Compostela’s profit margin?
A. 5%
B. 6%
C. 8%
D. 10%
Compostela Ltd. has an ROA of 9% and
an ROE of 15%. Its total asset turnover is 1.5x. What is
Compostela’s debt-to-asset ratio?
A. 40%
B. 60%
C. 68%
D. 13.5%
According to the Du Pont methodology,
if a firm’s total assets turnover and debt ratios are reasonable
compared...

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Total Asset Turnover has recently fallen to 1.20, bringing their
ROE down to 9.1%
a) What is this firm's Profit Margin?
B) If the company were able to improve its Total Asset Turnover
to 1.8, what would be their new ROE?
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Bank B has a profit margin...

The Wilson Corp has the following relationships:
Sales/Total
Assets
2.0x
Return on assets (ROA) 4.5%
Return on equity (ROE) 6.5%
What is Wilson’s profit margin and debt ratio?

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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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%
a. Calculate Caulder's profit margin assuming the firm uses only
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b. Calculate Caulder's debt-to-capital ratio assuming the firm
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Sales/Total assets - 2.3x
Return on assets (ROA) - 3%
Return on equity (ROE) - 10%
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capital. Round your answer to two decimal places.
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