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eBook DuPont Analysis Gardial & Son has an ROA of 8%, a 4% profit margin, and a return on equity equal to 17%. What is the company's total assets turnover? What is the firm's equity multiplier? Do not round intermediate calculations. Round your answers to two decimal places. Total assets turnover: _____ Equity multiplier: _____

Answer 1

Given ROA = 8% Profit margin = 4%. Return on equity =17% We have the formula ROA = Profit margin * Total assets turnover 8% = 4% * Total assets turnover Total assets turnover =8%/4% = 2.00 Therefore total assets turnover =2.00 Calculation of Equity multiplier ROE = ROA * Equity multiplier 17% = 8% * Equity multiplier Euity multiplier = 17%/8% = 2.125 = 2.13 Therefore Equity multiplier of a firm is 2.13