Excellon Enterprises has the following financial information: • • Return on Assets (ROA) = 7.5% Profit Margin = 6.2% Return on Equity (ROE) = 18% a) What is the company's total asset turnover? b) What is the equity multiplier?

Excellon Enterprises has the following financial information: • • Return on Assets (ROA) = 7.5% Profit Margin = 6.2% Return on Equity (ROE) = 18% a) What is the company's total asset turnover? b) What is the equity multiplier?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter7: Analysis Of Financial Statements

Section: Chapter Questions

Problem 1Q: Define each of the following terms: Liquidity ratios: current ratio; quick, or acid test,...

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Question

General Accounting

Excellon Enterprises has the following financial
information:
•
•
Return on Assets (ROA) = 7.5%
Profit Margin = 6.2%
Return on Equity (ROE) = 18%
a) What is the company's total asset turnover?
b) What is the equity multiplier?

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Below is an equation that breaks down the concept of Return on Equity into its components (individual parts). ROE = Net income Sales Net Profit margin Sales Total assets Asset turnover ROA X Total assets Total equity Equity multiplier Using this equation, explain briefly how a company can improve its Return on Assets (ROA), and the impact of this improvement on its Return on Equity (ROE). Is an improvement in ROA that the only way that ROE can increase?
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