XYZ Corp. has an asset turnover ratio of 0.75. Because the economy is currently sluggish ...

By Investopedia Staff AAA
Q:
XYZ Corp. has an asset turnover ratio of 0.75. Because the economy is currently sluggish, the firm cannot raise this ratio any higher than what it is. However, if the firm wanted to boost its return on assets to 16%, which of the following scenarios would help them achieve that?
a) An equity turnover of 1.2.
b) A profit margin of 21.33%.
c) A return on equity of 14.3%.
d) A debt-to-asset ratio of 0.62.
A:

The correct answer is: b)
Return on Assets = NI/Sales = Sales/Assets x NI/Sales

.16 = 0.75 x (NI/Sales)
Therefore, NI/Sales = .16/.75 = 21.33%


RELATED FAQS

  1. Unemployment resulting from changes in the basic composition of the economy ... ...

    The correct answer is a. An example of structural unemployment is the technological revolution. Computers might have eliminated ...
  2. You observe the following exchange rates in the following markets ...

    Free info on financial certification exams including study guides, exam questions, and much more!
  3. A 6.4% coupon bond that is expected to mature in five years is currently trading ...

    The correct answer is: C) Step 1: Future value of reinvested coupons. PMT = 3.20; n = 10; I = 2.9% Therefore, FV = 36.516
  4. You currently are holding a portfolio of bonds. Interest rates are expected to increase ...

    The correct answer is c. Bonds with high convexity are less affected by changes in interest rates than bonds with lower convexity. ...
RELATED TERMS
  1. No results found.

You May Also Like

Related Articles
  1. No results found.
Trading Center