Question

Assume the following relationships for the Caulder Corp.: Sales/Total assets 1.5x Return on assets (ROA) 5% Return on equity (ROE) 14%

Calculate Caulder's profit margin assuming the firm uses only debt and common equity, so total assets equal total invested capital. Round your answer to two decimal places. %

Calculate Caulder's debt-to-capital ratio assuming the firm uses only debt and common equity, so total assets equal total invested capital. Round your answer to two decimal places.

Answer 1

Asset turnover ROA +Profit margin 1.50 ROAAsset profit margin 3.33% [596 15] turnover ROEprofit margin x asset turnover x equity multiplier equity multiplier-ROE asset turnover x profit margin ] -2.80 [0.14 (1.50 x0.0333)] Debt to equity ratioEquity multiplier -1-1.80 [ 2.80-1]