To maintain a profit margin of 4% and a sales-to-assets ratio of 3, what is the ROA, if the debt-equity ratio is 1.0, interest payments and taxes are each $10,000, and EBIT is $40,000. What is the return on equity?
Using Excel use math and finance functions so calulations can be seen in background.© BrainMass Inc. brainmass.com June 3, 2020, 6:12 pm ad1c9bdddf
See attached Excel file
profit margin = income / Sales = 4%
Sales / Asset = 3
In Excel, the solution is clearly detailed for ease of understanding. The returns on equity given various ratios and amounts for profit margins are examined.