Question

In: Accounting

Dearborn Supplies has total sales of $191 million, assets of $95 million, a return on equity...

Dearborn Supplies has total sales of $191 million, assets of $95 million, a return on equity of 32 percent, and a net profit margin of 7.3 percent. What is the firms debt ratio?

The company's debt ratio is what percent? Round to one decimal place.

Solutions

Expert Solution

Net profit margin=Net profit/Sales

Net profit=(191*7.3%)

=$13.943 million

ROE=net income/equity

equity=13.943/0.32

=$43.571875 million

Total assets=Total liabilities+Total equity

Total debt=95-43.571875

=$51.428125 million

Debt ratio=debt/Total assets

=51.428125/95

=54.1%(Approx)


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