PRINTER VERSIONBACk NEXT Problem 48 and debt ratie O dank e

PRINTER VERSIONBACk NEXT Problem 4.8 and debt ratie? O dank e ) wa Te Rangoon T mber Company has the ollow ng ratios: Net sales rotal assets-1.89; ROA 8 13%, R E 12 sa h what are Rang 12.55 or 12.55o.) s pro t s a Rangoon\'s profit margin is and its debt ratio is

Solution

Total assets turnover = 1.89

ROA = 8.13%

ROE = 12.58%

ROA = Profit margin × Total assets turnover

Profit margin = ROA / Total assets turnover

= 0.0813 / 1.89

= 0.043 or 4.3 %

ROE = ROA x Equity multiplier

Equity multiplier = ROE / ROA

= 0.1258 / 0.0813

= 1.55

Debt ratio = (1 - Equity/Total Assets)

= 1 - 1/Equity Multiplier

= 1 - 1/1.55

= 0.35