Question

$90,000,000, ROA of 9.00 percent, ROE of 12.00 percent, and a net profit margin of 8.00 percent. What are the company's net income and net sales? Calculate the firm’s debt-to-equity ratio.

Answer 1

0.333 Times

Explanation:

The computation of debt-to-equity ratio is shown below:-

But before that we need to determine the following items

ROA = Net income ÷ Total Assets

9.00% = Net income ÷ $90,000,000

Net income =9.00% × $90,000,000

= $8,100,000

Profit margin = Net income ÷ Net Sales

8% = $8,100,000 ÷ Net sales

Net sales = $101,250,000

ROE = Net income ÷ Shareholders equity

12% = $8,100,000 ÷ Shareholders equity

Shareholders equity = $67,500,000

Total Liabilities = Total Assets - Equity

= $90,000,000 - $67,500,000

= $22,500,000

Debt - Equity ratio = Total Liabilities ÷ Equity

= $22,500,000 ÷ $67,500,000

= 0.333 Times