Question

In: Finance

Henderson's Hardware has an ROA of 7%, a 6% profit margin, and an ROE of 20%....

Henderson's Hardware has an ROA of 7%, a 6% profit margin, and an ROE of 20%.

What is its total assets turnover? Do not round intermediate calculations. Round your answer to two decimal places.

What is its equity multiplier? Do not round intermediate calculations. Round your answer to two decimal places.

Solutions

Expert Solution

ROA=Net income/Total assets

Net income=0.07*Total assets

Profit margin=Net income/Sales

Net income=0.06*Sales

ROE=Net income/Equity

Net income=0.2*Equity

Total asset turnover=Sales/Total assets

=(Net income/0.06)/(Net income/0.07)

=1.17(Approx)

Equity multiplier=Total assets/equity

=(Net income/0.07)/(Net income/0.2)

=2.86 (Approx)


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