Explore BrainMass

Explore BrainMass

    Calculating return on equity and return on assets

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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.

    © BrainMass Inc. brainmass.com March 4, 2021, 6:22 pm ad1c9bdddf
    https://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

    ADVERTISEMENT