Question

# Total assets are \$13.7million, while sales are \$18.7million, and total liabilities are \$4.5 million. Profit margin...

 Total assets are \$13.7million, while sales are \$18.7million, and total liabilities are \$4.5 million. Profit margin equals 10%.

 Requirement 1: What is net income? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)

 Net income \$

 Requirement 2: What is ROA? (Do not round intermediate calculations. Enter your answer as a percent rounded 2 decimal places (e.g., 32.16).)

 ROA %

 Requirement 3: What is ROE? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

 ROE %

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Worksheet

 Ans. 1 Profit margin is the percentage of net income on sales. Net income = Sales * Profit margin \$18,700,000 * 10% \$1,870,000 Ans. 2 Return on assets (ROA) is the percentage of net income on total assets. Return on assets (ROA) = Net income / Total assets * 100 \$1,870,000 / \$13,700,000 * 100 13.65% Ans. 3 Return on equity (ROE) is the percentage of net income on total equity. *Total equity = Total assets - Total liabilities \$13,700,000 - \$4,500,000 \$9,200,000 Return on equity (ROE) = Net income / Total equity * 100 \$1,870,000 / \$9,200,000 * 100 20.33%

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