Homework Answers
Solution :
| Profit Margin | 1.74% |
| Debt to Capital | 69.23% |
Working :
Details given in Question :
| Sales/Total Assets | 2.3 |
| Return on Assets | 4.0% |
| Return on Equity | 13.0% |
Profit Margin :
Profit Margin = Net Profit / Total Sales
= (Return on Assets) * (Total Assets / Sales)
= (Net Proft / Total Assets) * (Total Assets / Sales)
= 4.0% * (1 / 2.30)
= 1.74%
Debt Ratio :
To Calculate the debt ratio, first we have to calculate equity ratio.
Equity Ratio = Equity / Total Assets
= (Equity / Net Income) * (Net Income / Total Assets)
= (1 / 13.0%) * 4%
= 0.30769
Debt to Capital Ratio = 1 - 0.30769
= 0.69231
Debt to Capital Ratio = 69.23%
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#1 For the problem below: For Profit margin I got 2% and
it was right but debt to capital ratio I put 50% it was wrong and
1.63 was also wrong.
#2 I was lost here
#3 Is this right:
Assume the following relationships for the Caulder Corp.: Sales/Total assets 2x Return on assets (ROA) 4.0% Return on equity (ROE) 13.0% Calculate Caulder's profit margin and debt-to-capital ratio assuming the firm uses only debt and...
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