Lollar Corporation
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Using the Du Pont method, evaluate the effects of the following relationships for the Lollar Corporation.
Lollar Corporation has a profit margin of 5 percent and its return on assets (investment) is 13.5 percent. What is its asset turnover ratio?
If the Lollar Corporation has a debt-to-total-assets ratio of 60 percent, what will the firm's return on equity be?
What would happen to return on equity if the debt-to-total-assets ratio decreased to 40 percent?
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Solution Summary
This solution is comprised of a detailed explanation and calculation to compute what is its asset turnover ratio, the firm's return on equity, and what would happen to return on equity if the debt-to-total-assets ratio decreased to 40 percent.
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Lollar Corporation has a profit margin of 5 percent and its return on assets (investment) is 13.5 percent. What is its asset turnover ratio?
Du Pont equation = Profit margin x Total assets turnover
(ROA) = ...
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