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25 November, 19:29

Inc. has a net profit margin of 5% on sales of $50 million. It has book value of equity of $40 million and total liabilities with a book value of $30 million. What is Ladders' ROE? ROA?

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  1. 25 November, 21:28
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    ROE = 6.25%

    ROA = 3.57%

    Explanation:

    Sales = 50 million

    Net Profit margin = 5%

    Net profit = 50 million x 5% = 2.5 million

    Total Assets = Total Equity + Total Liabilities

    Total Assets = 40 million + 30 million = 70 million

    Return on Equity = Net Profit / Total equity

    Return on Equity = $2.5 million / $40 million = 0.0625 = 6.25%

    Return on Assets = Net profit / total Asset

    Return on Assets = 2.5 million / 70 million = 0.0357 = 3.57%
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