Marquez Inc. has announced $50,000 in net income after paying taxes of $26,000 and interest of $20,000. They intend to pay $17,000 of net income as dividends. Their assets have averaged $600,000 over the past year, during which their total debt ratio has averaged 40%. Given this information, answer the following about the company's profitability:
(a) Calculate the ROA and ROE.
(b) Calculate the payout and plowback ratios.
(c) What effect will the plowback have on the company's growth in equity?
a. ROA = net earnings before interest and taxes / total assets = (50000+26000+20000/600000) = 16%
ROE = net earnings available to equity shareholders / equity = 50000 / ...
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