Question

Dearborn Supplies has total sales of $193 ​million, assets of $110 ​million, a return on equity of 26 ​percent, and a net profit margin of 7.5 percent. What is the​ firm's debt​ ratio

Answer 1

49.39%

Step-by-step explanation:

The net income = sales x profit

= 193million x 7.5 percent

= 14 475 million dollars

The return on equity

= Net income/total equity

= 14.475/26%

= $55.67 million

Total debt = total asset-total equity

= 110million - 55.67

= $54.34 million

The debt ratio = total debt/total assets

= 54.33/110

= 0.4939

= 49.39%

49.39% is the firms debt ratio.