A firm is 100% equity financed. Its return on assets and profit margin are 10% and...

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A firm is 100% equity financed. Its return on assets and profit margin are 10% and...

A firm is 100% equity financed. Its return on assets and profit margin are 10% and 10%, respectively. Using Du Pont identity determine its total asset turnover (TAT)?

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Answer 1

Answer #1

If firm is 100% equity financed,

Asset = Equity

ROA = ROE

Using Du Pont Formula,

0.10 = NPM * AT * EM

0.10 = 0.10(AT)(1)

AT = 1

So,

Total Asset Turnover = 1

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Answer 2

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