Firm M has a margin of 10%, turnover of 2.5, sales of $940,000, and average stoc
ID: 2327999 • Letter: F
Question
Firm M has a margin of 10%, turnover of 2.5, sales of $940,000, and average stockholders' equity of $400,000.Required: Calculate Firm M’s average total assets, net income, return on investment (ROI), and return on equity (ROE). Firm M has a margin of 10%, turnover of 2.5, sales of $940,000, and average stockholders' equity of $400,000.
Required: Calculate Firm M’s average total assets, net income, return on investment (ROI), and return on equity (ROE).
Required: Calculate Firm M’s average total assets, net income, return on investment (ROI), and return on equity (ROE). Required: Calculate Firm M’s average total assets, net income, return on investment (ROI), and return on equity (ROE).
Explanation / Answer
Answer:
Margin = Net Income / Sales
0.1 = Net Income / $940,000
Net Income = $940,000 * 0.1
Net Income = $94,000
Turnover = Sales / Average Total Assets
2.5 = $940,000 / Average Total Assets
Average Total Assets = $940,000 / 2.5
Average Total Assets = $376,000
ROI = Margin * Turnover
ROI = 10% * 2.5
ROI = 25%
ROE = Net Income / Average Stockholders’ Equity
ROE = $94,000 / $400,000
ROE = 23.50%
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