Thompson Inc. Net Profit margin is .05 on sales of 4 millions. Debt ratio (debt to...

Thompson Inc. Net Profit margin is .05 on sales of 4 millions. Debt ratio (debt to assets) is .40 on Total debt (total liabilities) of 1 million. Calculate Return on Assets.

Expert Solution

Net profit margin=Net profit/Sales

Net profit=(4*0.05)=$0.2 million

Debt ratio=debt/Total assets

Total assets=(1/0.4)=$2.5 million

ROA=Net profit/Total assets

=0.2/2.5

=8%(or 0.08)

jeff jeffy answered 2 years ago

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