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    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 Preview

    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) = ...

    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.

    $2.19

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