Question

Ladders, Inc. has a net profit margin of 5.5 % on sales of $ 48.5 million. It has book value of equity of $ 41.8 million and total book liabilities of $ 28.2 million. What is​ Ladders' ROE?​ ROA? Note: Assume the value of Interest Expense is equal to zero.

Answer 1

ROE= 0.063816 = 6.38%

ROA = 0.038107 = 3.81%

Step-by-step explanation:

ROE = NET income / total equity

ROA = net income / average total asset

Net Profit margin = net income/ revenue

Equity = assets - liabilities

0.055 = net income/ $ 48.5 million

Net income = $2.6675 million

Assets = $ 41.8 million + $ 28.2 million = $70 million

ROE = $2.6675 million / $ 41.8 million = 0.063816

ROA = $2.6675 million / $70 = 0.038107

I hope my answer helps you