Ask Question
BusinessBusiness
8 January, 07:03

A firm has a ROE of 14 percent and a debt-to-equity ratio of 40 percent. If the total asset turnover is 3.4, what is the firm's profit margin?

+4
Answers (1)
  1. 8 January, 08:48
    0
    The firm's profit margin is 2.94%

    Explanation:

    The formula to find profit margin is

    ROE=Net profit margin * Assets/Equity*Total asset turnover

    We know the Roe is 14% and asset turnover is 40 %.

    We need to find the assets/Equity through debt to equity ratio. In the question we are told that debt to equity ratio is 40%, which means that debt is only 40% of equity. So if we assume equity to be 1 then debt is 0.40 (0.4*1). Assets will be the sum of debt and equity so assets are (1+0.4) = 1.40. Now in order to find the asset/equity we will divide assets by equity.

    1.4/1=1.4. Assets/Equity = 1.4

    Now we input these values in the formula.

    0.14=3.4*1.4*Profit Margin

    0.14/4.76 = Profit Margin

    Profit Margin = 0.0294=2.94%
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “A firm has a ROE of 14 percent and a debt-to-equity ratio of 40 percent. If the total asset turnover is 3.4, what is the firm's profit ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
LAS1. A city government spends $1,860,000 a month on public services. Of that amount, 46 percent is used for fire and police protection.
Answers (1)
A lease calls for a minimum rent of $2800 per month plus 4% of annual gross sales in excess of $500,000. What is the annual rent if the annual gross sales were $725,500?
Answers (1)
According to TASB, school districts may approach voters to issue bonds for?
Answers (1)
Tennessee Corporation is analyzing a capital expenditure that will involve a cash outlay of $109,332. Estimated cash flows are expected to be $36,000 annually for 4 years.
Answers (1)
Neveready Flashlights Inc. needs $302,000 to take a cash discount of 2/19, net 71. A banker will loan the money for 52 days at an interest cost of $11,800. a. What is the effective rate on the bank loan
Answers (1)
New Questions in Business
Commercial paper is very popular with many firms because Multiple Choice it can usually be issued below the prime rate. there are no required lines of credit at the bank. it satisfies the firm's need for long-term funds.
Answers (1)
Andrews Corp. ended the year carrying $33,836,000 worth of inventory. Had they sold their entire inventory at their current prices, how much more revenue would it have brought to Andrews Corp.?
Answers (1)
The manufacturing overhead budget at Foshay Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 6,100 direct labor-hours will be required in May. The variable overhead rate is $8.50 per direct labor-hour.
Answers (1)
Trinidad Schwab is an employee at the Kyletown Fire Department. He received the following benefits from his employer during 2019 for company purposes: On-site housing: $385 per month Employer-provided cell phone: $95 per month Meals: $190 per month
Answers (1)
Presented below is information related to Crane Corp. for the year 2020. Net sales $1,040,000 Write-off of inventory due to obsolescence $64,000 Cost of goods sold 624,000 Depreciation expense omitted by accident in 2019 44,000 Selling expenses
Answers (1)
Home » Business » A firm has a ROE of 14 percent and a debt-to-equity ratio of 40 percent. If the total asset turnover is 3.4, what is the firm's profit margin?
Sign Up Forgot Password?