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
Problem 1PS
Related questions
Question
5ME
![### 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
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images

Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you

Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,



Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,



Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,

Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education