Question

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.

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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