Question

​Ladders, Inc. has a net profit margin of 5.7 % on sales of $ 50.8 million. It has book value of equity of $ 38.4 million and total book liabilities of $ 28.6 million. What is​ Ladders' ROE?​ ROA? Note: Assume the value of Interest Expense is equal to zero. What is​ Ladders' ROE? ​Ladders' ROE is nothing​%. ​ (Round to two decimal​ places.) What is​ Ladders' ROA? ​Ladders' ROA is nothing​%. ​(Round to two decimal​ places.)

Answer 1

Answer:

ROE 7.54%

ROA 4.32%

Explanation:

with the profit margin and sales we got the net income:

$\frac{income}{sales} = Profit Margin$

sales x profit margin = net income

50,800,000 x 5.7% = 2,895,600‬

The Return on Equity (ROE) formula is:

$\frac{income}{equity} = ROE$

2,895,600 / 38,400,000 = 0,07540625 = 7.54%

The company yield 7.54% of his equity.

Then, Return on Assets (ROA)

$\frac{income}{assets} = ROE$

using the accounting equation we solve for assets:

assets = liab + equity

assets = 38.4 + 28.6 = 67

ROA = 2,895,600 / 67,000,000 = 0,0432179

ROA = 4.32%