Question

Wakers, Inc., has sales of $37 million, total assets of $23 million, and total debt of...

Wakers, Inc., has sales of $37 million, total assets of $23 million, and total debt of $6 million. Required: (a) If the profit margin is 9 percent, what is the net income? (b) What is the ROA? (c) What is the ROE?

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Answer #1
a) Calculation of net income:
Net income= Sales*profit margin
                       = 37*0.09= $3.33 million
Net income= $3.33 million
b) Calculation of ROA:
ROA= Net income/ Total assets*100
         =3.33/23*100= 14.48%
ROA=14.48%
c) Calculation of ROE:
Shareholder's Equity= Total assets-Total Debt
                                         =23-6= $17 million
ROE= Net income/ Shareholder's equity*100
        = 3.33/17*100=19.59%
ROE=19.59%
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