Keller cosmetics maintains an operating profit margin of 7% and asset turnover ratio of 4.
a. what is its roa? (enter your answer as a whole percent.) roa %
b. if its debt-equity ratio is 1, its interest payments and taxes are each $8,200, and ebit is $21,000, what is its roe? (do not round intermediate calculations. enter your answer as a whole percent.) roe %
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Ответ:
A) ROA = 28%
B) ROE = 20%
Explanation:
Requirement A
We know,
Return on Asset =![\frac{Net Income}{Average Total Assets}](/tpl/images/0431/0900/03f87.png)
If we break the ROA formula, we can get,
ROA =
× ![\frac{Net Sales}{Average total assets}](/tpl/images/0431/0900/fccfc.png)
We know, Profit margin = Net Income ÷ Net Sales; and
Asset Turnover ratio = Net sales ÷ Average total assets
Therefore, ROA = Profit margin × Asset Turnover
Given,
Profit Margin = 7% = 0.07
Asset Turnover = 4.0
Hence, Return on Asset = 0.07 × 4 = 0.28 = 28%
It shows how assets generate income over a period.
Requirement B
We know,
Return on Equity =![\frac{Net Income}{Stockholders' Equity}](/tpl/images/0431/0900/6bfcd.png)
If we break the formula, ROE = (Asset ÷ Equity) × (Debt Burden) × ROA
Given,
Debt-Equity ratio = 1
We know, Debt-equity ratio =![\frac{Total Debt}{Total Stockholders' Equity}](/tpl/images/0431/0900/df7f1.png)
As debt-equity ratio is 1, debt = equity
Therefore, assets = 2 times of debt or equity
Debt Burden = Net Income ÷ (EBIT - Interest)
Debt Burden = (EBIT - Interest - Tax) ÷ (EBIT - Interest)
Debt Burden = $(21,000 - 8,200 - 8,200) ÷ $(21,000 - 8,200)
Debt Burden = $4,600 ÷ $12,800
Debt Burden = 0.359375
We have already got ROA from requirement A, ROA = 28% = 0.28
Hence, ROE = (2 ÷ 1) × 0.359375 × 0.28
ROE = 0.20125
ROE = 20%
Ответ:
B) The efficient use of capital
Explanation:
The principles of motion economy are the
• Use of the human body
• Arrangements of the workplace
• Design of tools and equipment
• Time Conservation
Doesn't mention the use of capital so it must be B