In: Accounting
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.
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)