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EQUITY MULTIPLIER=Total Assets / Total Stockholders' Equity
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{100 * (30 / 100)} + 100 = 130
50%
Company's Total Assets Turnover Ratio is 5 and Equity multiplier is 1.5 times which is cal. as Net Sales/Total Assets and Total Assets/ Shareholder's equity resp. for the two ratios.
ROA = Net Profit Margin * Asset Turnover Asset Turnover = ROA/Profit Margin = 13.5/5 = 2.7%
EQUITY MULTIPLIER=Total Assets / Total Stockholders' Equity
Return on Assets = Profit Margin X Asset Turnover
Return on Assets DuPont is a ratio that shows how the return on assets depends on both asset turnover and profit margin. The DuPont Method or Formula breaks out these two components (asset turnover & profit margin) in order to determine the impact of each on the profitability of the company. This ratio helps to highlight the impact of changes in asset turnover and profit margin.Formula:ROA DuPont = (Net Income/Sales) * (Sales/Total Assets)
If you look at what Return on Assets is comprised of, Net Profit Margin and the Total Asset Turnover, if the firm is having a very slow turnover, the ROA will be declining if the turnover is greater in magnitude to the NPM.
Return on Assets DuPont is a ratio that shows how the return on assets depends on both asset turnover and profit margin. The DuPont Method or Formula breaks out these two components (asset turnover & profit margin) in order to determine the impact of each on the profitability of the company. This ratio helps to highlight the impact of changes in asset turnover and profit margin.Formula:ROA DuPont = (Net Income/Sales) * (Sales/Total Assets)
Margin and turnover in ROI calculations: Margin: In ROI calculation margin is the ratio of net operating income to total sales. Turnover: In ROI calculation turnover means the ratio of total sales to average operating assets. Operating assets include cash, A/R, inventory, PP&E, and so on. Land held for future use, leases, and investments do not count.
Return on Assets = Profit Margin on Sales x Asset Turnover .1 = Profit Margin on Sales x 3 .033 = Profit Margin on Sales
Given: ROA = 10%, Profit margin = 2%, ROE = 15% ROA = Profit margin x Asset Turnover Therefore, Asset Turnover = ROA / Profit margin = 10 / 2 = 5% ROE = Profit margin x Asset Turnover x Equity multiplier 15 = 2 x 5 x Equity Multiplier 15 / 10 = Equity Multiplier Equity Multiplier = 1.05
50%/6%= 8.3%
1.5=1.0 x EM 1.5=1.0EM 1.5/1.0EM EM=1.5/1.0=1.5 1.5=0.3TAT ROE=PROFIT MARGIN X TAT X EM TAT=1.5/0.3=5