# Calculating return on equity and return on assets

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Please help wth the following:

Felton Beverages maintains a profit margin of 4 percent and a sales-to-assets ratio of 3.

A. What is its return on assets?

B. If its debt-equity ratio is 1.0, its interest payments and taxes are each $10,000, and EBIT is $40,000, what is the return on equity?

Thank you for your assistance.

Â© BrainMass Inc. brainmass.com March 4, 2021, 6:22 pm ad1c9bdddfhttps://brainmass.com/business/financial-ratios/calculating-return-equity-return-assets-42292

#### Solution Preview

Profit Margin =4% this implies Net Income/Sales = 4%

Sales/Assets = 3

a. Return on Assets = Net Income / Assets

(Net Income/Sales) X ( Sales / Assets)

= 0.04 X 3

=12%

b. The debt equity ...

#### Solution Summary

The solution explains how to calculate the return on equity and assets given some ratios.

$2.49