Question

During the latest year. XYZ Corporation has total sales of $400,000. net income of 10000, and its year end total sses were S 500 000. The firm's total debt to total assets ratio was 30%, what is firm's profit margin? (Enter your answers as a decimal rounded to 4 decimal places, not a percentage. For example, enter 0. 0843 instead of 8.43 Your Answer: Answer D View hint for Question 23 Question 24 (1 point) If a company's ROA is 9% and its total long-term debt to total assets ratio is 40%, what is its ROE (return on. equity)? (Enter your answers as a decimal rounded to 4 decimal places, not a percentage For example enter 00843 instead of 843%) Your Answer:

Answer 1

2.50%; 15%

Step-by-step explanation:

Profit margin = (Net income ÷ sales) × 100

= ($10,000 ÷ $400,000) × 100

= 2.50%

Total long-term debt to total assets ratio = 40%

So,

= Total equity ÷ Total assets

= 60%

Equity multiplier = Total assets ÷ Total equity

= 1.66667

ROA = 9%

ROE (return on equity):

= (Profit margin × Total assets turnover) × Equity multiplier

= ROA × Equity multiplier

= 9% × 1.66667

= 15%