A company remains an operating profit margin of 8% and sales-to-assets ratio (asset turnover ratio) of...
A company remains an operating profit margin of 8% and sales-to-assets ratio (asset turnover ratio) of 3. It has assets of 2’000’000$ and equity of 1’200’000$. Its long term debt is 800’000$. Interest payments are 120’000$ and the tax rate is 35%.
- How much is sales?
- what is the ROA
- what is the ROE
- what is the ROC
Homework Answers
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| Please find below the answer | |
| Statementshowing Computations | |
| Paticulars | Amount |
| asset turnover ratio | 3.00 |
| Assets | 2,000,000.00 |
| Sales = 2m*3 | 6,000,000.00 |
| b) | |
| Operating profit = 6m*8% | 480,000.00 |
| Less Interest | 120,000.00 |
| Income before tax | 360,000.00 |
| Tax at 35% | (126,000.00) |
| Income after tax | 234,000.00 |
| ROA = 234,000/2000,000 | 11.70% |
| c) ROE = 234,000/1200,000 | 19.50% |
| d) ROC = 234,000/(1200,000+800,000) | 11.70% |
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