Question

Triangular Chemicals has total assets of 109 million, a return on equity of 43 ​percent, a net profit margin of 4.7 ​percent, and an equity multiplier of 2.62. How much are the​ firm's sales?

Answer 1

Triangular Chemicals' sales are calculated by first finding the total equity using the equity multiplier, then the net income using the return on equity, and finally dividing the net income by the net profit margin, resulting in approximately $380.6 million in sales.

Step-by-step explanation:

The student has inquired about calculating the sales of Triangular Chemicals when provided with certain financial metrics. Given that the total assets are $109 million, the return on equity (ROE) is 43%, the net profit margin is 4.7%, and the equity multiplier is 2.62, we can determine the firm's sales as follows:

The equity multiplier is calculated by dividing total assets by total equity. With an equity multiplier of 2.62, we find total equity as $109 million / 2.62 = $41.6 million. Moving on, the return on equity (ROE) is the net income divided by total equity. We can reverse engineer the net income by multiplying ROE by total equity: 0.43 * $41.6 million = $17.888 million. Finally, sales can be determined by dividing the net income by the net profit margin: $17.888 million / 0.047 = approximately $380.6 million. Therefore, the firm's sales are approximately $380.6 million.