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11 November, 13:11

Ladders, Inc. has a net profit margin of 5.5 % on sales of $ 50.9 million. It has book value of equity of $ 40.9 million and total book liabilities of $ 28.6 million. What is Ladders' ROE? ROA? Note: Assume the value of Interest Expense is equal to zero.

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  1. 11 November, 15:50
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    ROE=2.7995/40.9=6.84%

    ROA=2.7995/69.5=4.03%

    Explanation:

    ROE

    Return on equity of Ladder, Inc shall be calculated using the following formula:

    ROE=Net profit/Equity

    Net profit=5.5%*50.9=$2.7995 million

    Equity=$40.9 million

    ROE=2.7995/40.9=6.84%

    ROA

    Return on asset of Ladder, Inc shall be calculated using the following formula:

    ROA=net profit/total assets

    net profits=$2.7995 million

    Total assets=Total equity+total liabilities

    =40.9+28.6

    =$69.5 million

    ROA=2.7995/69.5=4.03%
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