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Lily Cosmetics

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Please verify and explain

Lily Cosmetics has annual sales of $500,000,000

maintains a net after tax profit margin of 5%
and has a sales-to-assets ratio of 4

a. What is its return on assets?

b. If its debt/equity ratio is 0.5 , what is the return on equity?

My answers are:
A. 250,000,000
b. 4:1

Am I correct? If not please explain where I went wrong.

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Solution Summary

The solution explains the calculation of return on assets and debt/equity ratio for Lily Cosmetics

Solution Preview

Your answers are not correct. You have to calculate the return on assets and equity. The return is expressed as a percentage and is a percentage of net income.

See below the calculations

Annual Sales = $500 million
Profit Margin = Net ...

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