Question

Question 4

Assume that the following financial ratios were computed from the 2017 financial statements of Florida Industries:

Return on sales (profit margin)	0.30
Return on assets	0.17
Common equity leverage	0.87
Capital structure leverage	2.22
Asset turnover	1.69

If Florida holds its other ratios constant in 2018, but increases its profit margin to 38%, what will be the 2018 return on assets?

Group of answer choices

5%

78%

64%

51%

Answer 1

rate positively ..

	We know that return on asset = Net profit margin * Asset turnover ratio
	Net profit margin =		38%
	Asset turnover ratio =	1.69
	Therefore return on asset = 1.69*38%	64%
	Ans =		64%