Consider a retail firm with a net profit margin of 3.09%,a total asset turnover of 1.79,total assets of $45.1 million, and a book value of equity of $18.9 million.
a. What is the firm's current ROE?
b. If the firm increased its net profit margin to 3.88%, what would be its ROE?
c. If, in addition, the firm increased its revenues by 19%
(maintaining this higher profit margin and without changing its assets or liabilities), what would be its ROE?
In January 2016, United Airlines (UAL) had a market capitalization of $20.67 billion, debt of $12.04 billion, and cash of $5.07 billion. United Airlines had revenues of $38.88 billion. Southwest Airlines (LUV) had a market capitalization of $27.47billion, debt of $3.34 billion, cash of $3.14 billion, and revenues of $19.71 billion.
a. Compare the market capitalization-to-revenue ratio (also called the price-to-sales ratio) for United Airlines and Southwest Airlines.
b. Compare the enterprise value-to-revenue ratio for United Airlines and Southwest Airlines.
c. Which of these comparisons is more meaningful? Explain.
I can only answer 1 question at a time so I am solving first question.
Part (c) since profit margin is as it is which means that no value among the 3 parts of du-Pont formula ha changed and hence ROE will remain same as 16.57%.
Please do rate me and mention doubts, if any, in the comments section .
Consider a retail firm with a net profit margin of 3.09%,a total asset turnover of 1.79,total...
In January 2016, United Airlines (UAL) had a market capitalization of $20.67 billion, debt of $12.04 billion, and cash of $5.07 billion. United Airlines had revenues of $38.88 billion. Southwest Airlines (LUV) had a market capitalization of $27.47billion, debt of $3.34 billion, cash of $3.14 billion, and revenues of $19.71 billion. a. Compare the market capitalization-to-revenue ratio (also called the price-to-sales ratio) for United Airlines and Southwest Airlines. b. Compare the enterprise value-to-revenue ratio for United Airlines and Southwest Airlines....
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