Question

In: Finance

A firm reports the following: Net income 667,000 ROE 9.7% debt eq ratio .68 What is...

A firm reports the following:

Net income 667,000

ROE 9.7%

debt eq ratio .68

What is the firms Return on assets

15.78

6.06

5.52

5.77

16.3

Solutions

Expert Solution

Step 1 - Compute Equity

It is given that net income = $667,000 and Return on equity (ROE) = 9.7%

ROE = Net income / Equity

0.097 = 667,000 / Equity

0.097 * Equity = 667,000

Equity = 667,000 / 0.097

Equity = 6,876,288.6597

Step 2 - Compute Debt

In the question it is given that, debt to equity ratio = 0.68

Debt to equity ratio = Total debt / Total equity

0.68 = Total debt / 6,876,288.6597

0.68 * 6,876,288.6597 = Total debt

Total debt = 4,675,876.289

Step 3 - Compute Total Assets

In the last steps you got total debt and total equity. In the balance sheet the total assets always equals the total liabilities and equity.

Total assets = Total liablities and equity

= 4,675,876.289 + 6,876,288.6597

= 11,552,164.95

Step 4 - Compute Return on Assets (ROA)

ROA = Net Income / Total Assets

= 667,000 / 11,552,164.95

= 0.057738 ie, 5.77%

Therefore Return on assets is 5.77%


Related Solutions

Profit margin = 9.2 % Capital intensity ratio = .53 Debt−equity ratio = .68 Net income...
Profit margin = 9.2 % Capital intensity ratio = .53 Debt−equity ratio = .68 Net income = $ 103,000 Dividends = $ 52,000 Based on the above information, calculate the sustainable growth rate for Southern Lights Co. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Sustainable growth rate              %
A firm has a (net income/taxable income) ratio of 0.8, aleverage ratio of 1.5, a...
A firm has a (net income/taxable income) ratio of 0.8, a leverage ratio of 1.5, a (taxable income/EBIT) of 0.4, an asset turnover ratio of 2, and a return on sales ratio of 10%. What is the firm's ROE?
Which of the following is assessed using the debt​ ratio? A. net income B. profitability C....
Which of the following is assessed using the debt​ ratio? A. net income B. profitability C. revenues D. risk of default
What would be the potential impact on the net income, return on assets, and debt-to-asset ratio...
What would be the potential impact on the net income, return on assets, and debt-to-asset ratio if ALL of a company’s “goodwill” on the balance sheet is considered impaired and of no value?  (if goodwill is of zero value, the company has to write off the value as a loss and remove goodwill from its total assets)
What is the difference between a debt/income ratio and a debt serving ratio? What impact on...
What is the difference between a debt/income ratio and a debt serving ratio? What impact on both measures did the monetary policy from the late 1990s to 2004 have?
Barrett, Inc., has a total debt ratio of .64, total debt of$324,000, and net income...
Barrett, Inc., has a total debt ratio of .64, total debt of $324,000, and net income of $40,500.What is the company’s return on equity?
If a company has a ROE of 20 percent, and a debt ratio of 25 percent,...
If a company has a ROE of 20 percent, and a debt ratio of 25 percent, what is its return on total assets (ROA)? A. 16.7% B. 26.7% C. 5% D. 15% E. 100%
Imagine a corporation with $1,000,000 of assets and a debt ratio of 40%. ROE (return on...
Imagine a corporation with $1,000,000 of assets and a debt ratio of 40%. ROE (return on equity) is expected to be 20% for the foreseeable future. Assuming the firm maintains the same amount of debt indefinitely (as opposed to keeping the same debt ratio), respond to the following questions.                                           a. If the firm doesn’t pay out any dividends or re-purchase any shares, what do you expect the firm’s earnings to be for the next three years? Complete the table to...
Calculate your net worth and your debt ratio, current ratio, liquidity ratio, debt payment ratio, and...
Calculate your net worth and your debt ratio, current ratio, liquidity ratio, debt payment ratio, and inflows and outflows, do you have a shortage or surplus. Current Value of your home $330,000 Monthly gas $300.00 Balance of car loan $27,000 Monthly utilities $500.00 Balance of student loans $29,000 Monthly groceries $1100.00 Value of car $40,000 Monthly meals out $400.00 Balance of Mortgage $200,000 Monthly cable/internet $150.00 Household contents $19,000 Monthly cell phone $275.00 Stock portfolio 194,000 Monthly Miscellaneous $75.00 Balance...
a firm has a debt-equity ratio of 1.46.What is the total debt ratio? 0.59 0.46 0.77...
a firm has a debt-equity ratio of 1.46.What is the total debt ratio? 0.59 0.46 0.77 0.68
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT