Question

DTO, Inc., has sales of $24 million, total assets of $21.1 million, and total debt of $8.2 million. Assume the profit margin is 10 percent. a. What is the company's net income? (Do not round intermediate calculations. Enter your answer in dollars not in millions, e.g., 1,234,567.) b. What is the company's ROA? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the company's ROE? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

a. Net income = Sales * profit margin

= $24 million * 10%/100

= $2.4 million

b.  ROA = Profit / Total Assets

= $2.4 million / $21.1 million

= 0.11374

= 11.374%

c.  ROE = Profit / (Total Assets - Debt)

= $2.4million / ($21.1million - $8.2million)

= $2.4million / $12.9 million

= 0.186

= 18.6%