Purchase Solution

Effect on firm's return on net operating assets

Not what you're looking for?

Ask Custom Question

A firm earns a profit margin of 3.8 percent on sales of $435 million and employs net operating assets of $150 million to do so. It considers adding another product line that will earn a 4.8 percent profit margin with an asset turnover of 2.3.
What would be the effect on the firm's return on net operating assets of adding the new product line?

Purchase this Solution
Solution Summary

The solution computes the effect on the firm's return on net operating assets of adding the new product line.

Solution Preview

It is assumed that net operating assets remain unchanged after introducing new product line.

Asset Turnover = Sales / Assets

Profit ...

Purchase this Solution
Free BrainMass Quizzes
Marketing Research and Forecasting

The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

View More Free Quizzes
Related BrainMass Solutions

  • financial statements, calculate ratios for 2010

    /Interest 5.500104 Gross profit margin = Gross Profit /sales 18.3% Net Profit Margin= Net Profit/Sales 2.5% The return on total assets = Net Profit/Total Assets 5.2% The return on equity = Net Profit/Stockholder's

  • Using Financial Ratios to Make Recommendations and Improvements

    Return on assets is also a profitability ratio and is measure by the firm's net income divided by total assets.

  • Return on Common Equity vs Total Assets

    Return on common stockholders' equity = Net Income -Preference dividend / Average Equity Return on Total Assets = Net operating Profit after taxes/Assets Normally Return on common equity will be larger than return on total assets.

  • Financial Analysis

    = 1.33 Total Debt Ratio : total debts / total assets = 5500/7500 = 0.73 Return on Assets : Net income/total assets = 2200/7500 = 0.29 Return on Equity : Net Income /total equity = 2200/2000 = 1.1 Operating profit margin : Operating income/sales

  • Financial Analysis - Liquidity Position

    on Equity 2004 Return on Equity = Net Income/Equity = 90,000/330,000 = 27.27% 2003 Return on Equity = Net Income/Equity = 77,000/300,000 = 25.67% 2002 Return on Equity = Net Income/Equity = 45,000/200,000 = 22.50%

  • Rate of return

    Return on Assets = (Net Income + Interest X (1-tax rate)/Total Assets If we ignore taxes, then Net Income + Interest = Operating Income Return on Assets = Operating Income/Assets Since both companies have the same assets of $2 million and operating

  • Debt & Ratio analysis

    profit margin 0.135 Net profit margin 0.091 Return on total assets (ROA) 0.099 Return on common equity (ROE) 0.167 Earnings per share (EPS) $3.10 a.

  • Return on investment (ROI)

    (As ROI =Net income/ average total operating assets and increase in net income will lead to increase in ROI) Holding all other factors equal, if average total operating assets are increased, what will be the effect on return on investment (ROI)?

  • ROCE: Solar, Inc. has financial leverage of 36.0% and a net

    If the company wants to maintain the same level of operating profitability, what is the firm's return on common equity after this repurchasing? c.

View More Related Solutions