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
Equity Multiplier ROA*Equity Multiplier=ROE so, (10%)*(x)=(15%), therefore, Equity Multiplier=15%/10%= 1.5 times Total Asset Turnover Profit Margin*Total Asset Turnover = ROA, so (2%)*(x)=10%, therefore Total Asset Turnover=10%/2%= 5 times
0.7 and 0.2
N x 1.15
percent increase=(new amount-original amount) _____________________ original amount
18%
EQUITY MULTIPLIER=Total Assets / Total Stockholders' Equity
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.
Equity Multiplier ROA*Equity Multiplier=ROE so, (10%)*(x)=(15%), therefore, Equity Multiplier=15%/10%= 1.5 times Total Asset Turnover Profit Margin*Total Asset Turnover = ROA, so (2%)*(x)=10%, therefore Total Asset Turnover=10%/2%= 5 times
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
For a change of p percent, the multiplier is (1+p/100).
0.7 and 0.2
0.027
0.18
ROA = Net Profit Margin * Asset Turnover Asset Turnover = ROA/Profit Margin = 13.5/5 = 2.7%
ROE= profit margin × total assets turnover × equity multiplier ROE= ( Net income / sales ) × ( sales / total assets ) × ( total assets / common equity ) ROE= 3% × ( 100/50)×2 ROE = 3% × 4 = 12 %
N x 1.15
1.61%