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.

(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

#### Earn Coins

Coins can be redeemed for fabulous gifts.