Question

Atlanta Company, had an ROA of 6.5 percent, a profit margin of 11.50 percent, and sales $20 million. Calculate Atlanta's total assets. Show your calculation

Answer 1

Answer:

The right solution is "35.39".

Explanation:

Given:

Profit margin,

= 11.50%

or,

= 0.115

ROA,

= 6.5%

or,

= 0.065

Sales,

= $20 million

As we know,

⇒ $Profit \ margin = \frac{Net \ income}{Sales}$

or,

⇒ $Net \ income = Sales\times Profit \ margin$

                       $=20\times 0.115$

                       $=2.3$

hence,

The total asset will be:

⇒ $ROA = \frac{Net \ income}{Total \ assets}$

or,

⇒ $Total \ assets = \frac{Net \ income}{ROA}$

                        $=\frac{2.3}{0.065}$

                        $=35.39$