Q:
A:
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 debttoasset ratio of 0.62.
a) An equity turnover of 1.2.
b) A profit margin of 21.33%.
c) A return on equity of 14.3%.
d) A debttoasset ratio of 0.62.
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%
MORE FAQS

How is asset turnover calculated?

How can a company raise its asset turnover ratio?

Which financial ratios are considered to be efficiency ratios?

What does a high turnover ratio signify for an investment fund? (KNOW)

What do efficiency ratios measure?

What is the difference between accounts payable turnover ratio and accounts receivables turnover ratio?

When is it useful to look at a company's fixed asset turnover ratio?

What is a good turnover ratio for a mutual fund?

How does the equity multiplier change in relation to asset turnover?

For what kinds of businesses is the fixed asset turnover ratio most important?

How should I use portfolio turnover to evaluate a mutual fund?

What are some examples of efficiency ratios used in measuring businesses?

XYZ Corp. has a debt to equity ratio of 42%. If net income is $200,000 ...

How do I use ratios to perform a financial analysis?

What is the fixed asset turnover ratio and why is it important?

How many attempts at each CFA exam is a candidate permitted?

Are hedge funds regulated by FINRA?

Do financial advisors need to pass the Series 7 exam?

Is a financial advisor required to have a degree?

Do financial advisors need to be approved by FINRA?
RELATED FAQS

How is asset turnover calculated?
Learn what the asset turnover ratio is, how it can be used to compare companies in the same sector, and how the ratio is ... 
How can a company raise its asset turnover ratio?
Find out more about the asset turnover ratio, what it measures, how to calculate the ratio and how a company could increase ... 
Which financial ratios are considered to be efficiency ratios?
Learn about efficiency ratios, what financial ratios are considered efficiency ratios, and how to calculate three different ... 
What does a high turnover ratio signify for an investment fund? (KNOW)
Find out more about the turnover ratio, what the turnover ratio measures and what a high turnover ratio indicates about an ... 
What do efficiency ratios measure?
Learn about efficiency ratios, what they measure, how to calculate commonly used efficiency ratios and how to interpret these ... 
What is the difference between accounts payable turnover ratio and accounts receivables ...
Learn the difference between the accounts payable turnover ratio and the accounts receivable turnover ratio. Understand what ...
RELATED TERMS

Receivables Turnover Ratio
An accounting measure used to quantify a firm's effectiveness ... 
Return On Assets Managed  ROAM
A measure of profits shown as a percentage of the capital that ... 
DuPont Identity
An expression that breaks return on equity (ROE) down into three ... 
Activity Ratios
Accounting ratios that measure a firm's ability to convert different ... 
Overall Turnover
A synonym for total revenues, commonly used in Europe and Asia. ... 
Expected Return
The amount one would anticipate receiving on an investment that ...