Question

Firm M has a margin of 11%, turnover of 1.6, sales of $860,000, and average stockholders' equity of $430,000. Required: Calculate Firm M’s average total assets, net income, return on investment (ROI), and return on equity (ROE).

Answer 1

Net income $94600

Avg Total Assets $537,500

ROI 17.6%

ROE 22%

Step-by-step explanation:

Sales $860,000.00

Turnover 1.60

Assets Turnover ratio =
`(Sales)/(Assets)`

1.60 = 860,000/Assets

Avg Total Assets
`= (860,000)/(1.6) = $537,500`

Margin =11%

Net income =11% *860,000 = $94600

`ROI = (Return)/(Assets)`

`ROI = (94600)/(537,500) = 17.6%`

`ROE = (Return)/(Equity)`

`= (94600)/(430,000) = 22 %`