Question

DTO, Inc., has sales of $23 million, total assets of $20.5 million, and total debt of $7.9 million. Assume the profit margin is 12 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:

See below

Explanation:

1. Net income

Net income = Sales × Profit margin

Net income = $23,000,000 × 12% = $2,760,000

2. ROA Return on Assets

ROA = Net income ÷ Total assets

= $2,760,000 ÷ $20,500,000

= 13.46%

3. ROE Return on equity

ROE = Net income ÷ Total equity