1 answer

A firm has sales of $1,000,000, a net profit margin of 6%, total assets of $1,200,000,...

Question:

A firm has sales of $1,000,000, a net profit margin of 6%, total assets of $1,200,000, and a total debt ratio of 50%. It pays
A firm has sales of $1,000,000, a net profit margin of 6%, total assets of $1,200,000, and a total debt ratio of 50%. It pays no dividends. The return on equity is ------ 4 percent 5 percent 6 percent 10 percent

Answers

Total Debt = 1200000*50% = 600000

Total equity = 1200000-600000 = 600000

Net income = 1000000*6% = 60000

Return on equity = Net income/Total equity = 60000/600000 = 10%

So answer is d) 10 percent

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