Question

Jiminy Cricket Removal has a profit margin of 11 percent, total asset turnover of 1.13, and ROE of 14.33 percent. What is this firm’s debt–equity ratio?

Answer 1

PROFIT MARGIN	11.00%
TOTAL ASSET TURNOVER	1.13
ROE	14.33%
DEBT – EQUITY	???
ASSET TURNOVER RATIO =	NET SALES/ AVERAGE TOTAL ASSET
Or , 1.13* AVERAGE TOTAL ASSET=	NET SALES
PROFIT MARGIN RATIO =	NET INCOME/ NET SALES
Or , 11%=	NET INCOME / NET SALES
Or, 11%* NET SALES =	NET INCOME
[WHERE , NET SALES =1.13* AVERAGE TOTAL ASSET]
Or , 11%*(1.13*AVERAGE TOTAL ASSET) =	NET INCOME
ROE=	NET INCOME/ SHAREHOLDERS EQUITY
Or, 14.33%=	11%*(1.13*AVERAGE TOTAL ASSET) / SHAREHOLDERS EQUITY
Or, SHAREHOLDERS EQUITY =	11%*(1.13*AVERAGE TOTAL ASSET) / 14.33%
Or, SHAREHOLDERS EQUITY =	0.8674110258 * AVERAGE TOTAL ASSETS
[ WHERE , AVERAGE TOTAL ASSET = DEBT +SHAREHOLDERS EQUITY]
AS PER BALANCE SHEET > DEBT + EQUITY = TOTAL ASSET
Or, SHAREHOLDERS EQUITY =	0.8674110258 * [ DEBT + SHAREHOLDERS EQUITY ]
Or, 1 * SHAREHOLDERS EQUITY =	0.8674110258 * DEBT + 0.8674110258 * SHAREHOLDRS EQ
Or, (1- 0.8674110258 )* SHAREHOLDRS EQ=	0.8674110258 * DEBT
Or, 0.1325889742 SHAREHOLDERS EQ =	0.8674110258 * DEBT
Or, 0.1325889742 SHAREHOLDERS EQ / 0.8674110258 =	DEBT
Or , 0.1528559936 SHAREHOLDERS EQ =	DEBT
Or, 0.1528559936 =	DEBT / SHAREHOLDERS EQ