DTO, Inc., has sales of $14 million, total assets of $12 million, and total debt of $6.7 million. Assume the profit margin is 7 percent. a. What is the company's net income? (Do not round intermediate calculations. Enter your answer in dollars not in millions, e.g., 1,234,567.) b. What is the company's ROA? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the company's ROE? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Net income b. ROA % C. ROE %
DTO, Inc., has sales of $14 million, total assets of $12 million, and total debt of $6.7 million. Assume the profit margin is 7 percent. a. What is the company's net income? (Do not round intermediate calculations. Enter your answer in dollars not in millions, e.g., 1,234,567.) b. What is the company's ROA? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the company's ROE? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. Net income b. ROA % C. ROE %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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![### Financial Analysis Case Study: DTO, Inc.
**DTO, Inc.** has the following financial metrics:
- **Sales:** $14 million
- **Total Assets:** $12 million
- **Total Debt:** $6.7 million
- **Profit Margin:** 7 percent
#### Analysis Questions:
1. **What is the company's net income?**
(Note: Do not round intermediate calculations. Enter your answer in dollars, not in millions, e.g., 1,234,567.)
2. **What is the company's ROA (Return on Assets)?**
(Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
3. **What is the company's ROE (Return on Equity)?**
(Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
#### Calculation Table:
| | Calculation | Answer |
|----|--------------------|--------|
| a. | Net income | |
| b. | ROA | % |
| c. | ROE | % |
### Steps for Calculation:
#### Net Income:
Net income is calculated using the profit margin and total sales.
- **Profit Margin = 7%**
- **Sales = $14,000,000**
\[ \text{Net Income} = \text{Sales} \times \text{Profit Margin} \]
\[ \text{Net Income} = 14,000,000 \times 0.07 \]
\[ \text{Net Income} = \$980,000 \]
#### Return on Assets (ROA):
ROA is calculated as net income divided by total assets.
- **Net Income = $980,000**
- **Total Assets = $12,000,000**
\[ \text{ROA} = \left( \frac{\text{Net Income}}{\text{Total Assets}} \right) \times 100 \]
\[ \text{ROA} = \left( \frac{980,000}{12,000,000} \right) \times 100 \]
\[ \text{ROA} = 8.17\% \]
#### Return on Equity (ROE):
ROE can be calculated by dividing net income by shareholders' equity. Share](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4075dd7b-7cf0-4080-a9ab-c20ff4793850%2F382c17b2-89a6-4066-9193-434ebcb15036%2Fkh18b8_processed.png&w=3840&q=75)
Transcribed Image Text:### Financial Analysis Case Study: DTO, Inc.
**DTO, Inc.** has the following financial metrics:
- **Sales:** $14 million
- **Total Assets:** $12 million
- **Total Debt:** $6.7 million
- **Profit Margin:** 7 percent
#### Analysis Questions:
1. **What is the company's net income?**
(Note: Do not round intermediate calculations. Enter your answer in dollars, not in millions, e.g., 1,234,567.)
2. **What is the company's ROA (Return on Assets)?**
(Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
3. **What is the company's ROE (Return on Equity)?**
(Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
#### Calculation Table:
| | Calculation | Answer |
|----|--------------------|--------|
| a. | Net income | |
| b. | ROA | % |
| c. | ROE | % |
### Steps for Calculation:
#### Net Income:
Net income is calculated using the profit margin and total sales.
- **Profit Margin = 7%**
- **Sales = $14,000,000**
\[ \text{Net Income} = \text{Sales} \times \text{Profit Margin} \]
\[ \text{Net Income} = 14,000,000 \times 0.07 \]
\[ \text{Net Income} = \$980,000 \]
#### Return on Assets (ROA):
ROA is calculated as net income divided by total assets.
- **Net Income = $980,000**
- **Total Assets = $12,000,000**
\[ \text{ROA} = \left( \frac{\text{Net Income}}{\text{Total Assets}} \right) \times 100 \]
\[ \text{ROA} = \left( \frac{980,000}{12,000,000} \right) \times 100 \]
\[ \text{ROA} = 8.17\% \]
#### Return on Equity (ROE):
ROE can be calculated by dividing net income by shareholders' equity. Share
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