In: Finance
A firm has an ROA of 15%, profit margin of 3% and ROE of 30%. What is its liability to total asset ratio?
50%
60%
70%
20%
A firm has an ROA of 15%, profit margin of 3% and ROE of 25%. What is its liability to total asset ratio?
59.88%
60.05%
40.00%
20.16%
A firm has an ROA of 15%, profit margin of 3% and ROE of 25%. What is its liability to total asset ratio?
59.88%
60.05%
40.00%
20.16%
(1)
ROA = Net Income/Total Assets = 15%
Profit margin = Net Income/Net Sales = 3%
ROE = Net income/Shareholder’s Equity= 30%
ROE = ROA * Total Asset/Equity
30% = 15% * Total Asset/Equity
Equity/Total Assets = 50%
Therefore Liability to Total Assets ratio = 100% – Equity/Total Assets ratio
= 100%-50%
=50%
Liability to Total Assets ratio is 50%.
(2)
ROA = Net Income/Total Assets = 15%
Profit margin = Net Income/Net Sales = 3%
ROE = Net income/Shareholder’s Equity= 25%
ROE = ROA * Total Asset/Equity
25% = 15% * Total Asset/Equity
Equity/Total Assets = 60%
Therefore Liability to Total Assets ratio = 100% – Equity/Total Assets ratio
= 100%-60%
=40%
Liability to Total Assets ratio is 40%.
(3)
ROA = Net Income/Total Assets = 15%
Profit margin = Net Income/Net Sales = 3%
ROE = Net income/Shareholder’s Equity= 25%
ROE = ROA * Total Asset/Equity
25% = 15% * Total Asset/Equity
Equity/Total Assets = 60%
Therefore Liability to Total Assets ratio = 100% – Equity/Total Assets ratio
= 100%-60%
=40%
Liability to Total Assets ratio is 40%.