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Debt ratio, return on equity, profit margin

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Balance Sheet
Cash & M/S 30,000 Accruals 20,000
Receivables 70,000 Accounts Payable 60,000
Inventories 120,000 Notes Payable 80,000
Fixed Assets 480,000 L-T Liabilities 140,000
Total Assets 700,000 Common Equity 400,000
Total 700,000

Annual Sales = $1,400,000
Net Income = $63,000
Cost of Goods Sold = $960,000
Number of Shares Outstanding = 30,000

1. What is the total asset turnover ratio of the firm?
2. What is the debt ratio of the firm?
3. What is the days sales outstanding (DSO) of the firm? (Use a 360-day year.)
4. What is the current ratio of the firm?
5. What is the profit margin of the firm?
6. What is the return on equity?

Solution Preview

1. What is the total asset turnover ratio of the firm?
=Sales/Total Assets
=1400000/700000
=2 times
2. What is the debt ratio of the firm?
=Debt/Total assets
=140000/700000
=0.2 times

3. ...

Solution Summary

The response helps in estimating debt ratio, return on equity, profit margin. The total asset turnover ratio for the firm is determined.

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