Question

Highgate Computer Company produces $1.8 million in profits from $27 million in sales. It has total...

Highgate Computer Company produces $1.8 million in profits from $27 million in sales.

It has total assets of $15 million.
a. Calculate Highgate’s total asset turnover and its net profit margin.
b. Find the company’s ROA, ROE, and book value per share, given that it has a total
net worth of $6 million and 500,000 shares of common stock outstanding.

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Homework Answers

Answer #1

(a).

Total asset turnover = 1.8

Explanation;

Total asset turnover = Sales / Total assets

Total asset turnover = $27 million / $15 million

= 1.8

Net profit margin = 6.67%

Explanation;

Net profit margin = Net profit / Sales

Net profit margin = $1.8 million / $27 million

= 6.67%

(b).

ROA = 12%

Explanation;

ROA = Net profit / Total assets

ROA = $1.8 million / $15 million

= 12%

ROE = 30%

Explanation;

ROE = Net profit / Net worth

ROE = $1.8 million / $6 million

= 30%

Book value per share = $12

Explanation;

Book value per share = Net worth / Number of shares outstanding

Book value per share = $6000000 / $500000

= $12

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