Question

Gardial & Son has an ROA of 9%, a 5% profit margin, and a return on equity equal to 16%. What is the company's total assets turnover? What is the firm's equity multiplier? Do not round intermediate calculations. Round your answers to two decimal places. Total assets turnover: Equity multiplier:

Answer 1

To calculate the company's total assets turnover, divide net sales by average total assets. The formula for total assets turnover is Net Sales / Average Total Assets. To calculate the firm's equity multiplier, divide average total assets by average equity. The formula for the equity multiplier is Average Total Assets / Average Equity.

Step-by-step explanation:

The total assets turnover can be calculated by dividing the company's net sales by its average total assets. The formula for total assets turnover is:

Total Assets Turnover = Net Sales / Average Total Assets

Given that the company's profit margin is 5%, we know that profit margin is equal to net income divided by net sales. Therefore, we can calculate net income by multiplying net sales by the profit margin. The formula for net income is:

Net Income = Net Sales * Profit Margin

Using the given information, we can calculate net income as follows:

Net Income = 9,000,000 * 0.05 = 450,000

The return on equity can be calculated by dividing net income by average equity. The formula for return on equity is:

Return on Equity = Net Income / Average Equity

Using the given information, we can calculate return on equity as follows:

Return on Equity = 450,000 / Average Equity = 0.16

From the given information, we have two unknowns: average total assets and average equity. We will use these equations to solve for the unknowns.

Answer 2

The question involves calculating the total assets turnover and equity multiplier for Gardial & Son. The total assets turnover is found by dividing sales by total assets, calculated using the profit margin and ROA. The equity multiplier is found using the formula ROE = (ROA x Equity Multiplier), using the given ROE and ROA values.

Step-by-step explanation:

The subject of this question is the calculation of certain financial metrics, specifically the total assets turnover and the equity multiplier for Gardial & Son. To find the total assets turnover, we need to divide the company's sales by its total assets. The formula for total assets turnover is Sales / Total Assets. Unfortunately, we don't have the sales figure directly, but we can calculate it using the profit margin, which is given as 5%. The profit margin is calculated by dividing Net Income by Sales. We rearrange this to find Sales = Net Income / Profit Margin. Since the Return on Assets (ROA) is given as 9%, which is also Net Income / Total Assets, we can equate this ROA to the profit margin formula to solve for Sales in terms of Total Assets.

ROA = Net Income / Total Assets, and Sales = Net Income / 0.05 (since Profit Margin is 5%, or 0.05 in decimal form). Setting these two equations equal to each other, we can solve for Total Assets in terms of Sales and then find the Total Assets Turnover.

For the equity multiplier, we know that Return on Equity (ROE) is equal to 16%, which is also Net Income / Equity. The equity multiplier is defined as Total Assets / Equity. We can use the relationship ROE = (ROA x Equity Multiplier) to find the Equity Multiplier, given that we have both ROE and ROA.

Using the formula for ROE, we have 0.16 = (0.09 x Equity Multiplier), thus Equity Multiplier = 0.16 / 0.09. After calculating this, we round the answer to two decimal places as per the question's instruction.

The calculation steps for Total Assets Turnover and Equity Multiplier must be done numerically with the actual figures, which are not provided in the question. Without these figures, we cannot provide the numerical answer.