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

Demonstrate, using equations from the Dupont or similar ratio model ...

How is asset turnover calculated?

How can a company raise its asset turnover ratio?

What is considered a good turnover ratio for a mutual fund?

How can a mutual fund raise or lower its turnover ratio?

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 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

Demonstrate, using equations from the Dupont or similar ratio model ...
The key to this question is the relationship between margins and turns in the ROE portion of ratio models and formulas. ROE ... 
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 ... 
What is considered a good turnover ratio for a mutual fund?
Understand what the concept of turnover ratio represents in relation to a mutual fund, and how an investor can evaluate a ... 
How can a mutual fund raise or lower its turnover ratio?
Find out how a fund manager can raise or lower a fund's turnover ratio, including how to interpret this metric and what it ... 
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 ...
RELATED TERMS

Asset Turnover Ratio
The amount of sales generated for every dollar's worth of assets ... 
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 ... 
Working Capital Turnover
A measurement comparing the depletion of working capital to the ... 
DuPont Identity
An expression that breaks return on equity (ROE) down into three ... 
Overall Turnover
A synonym for total revenues, commonly used in Europe and Asia. ...