The operating profit margin (EBIT/sales) of ABC, Inc. is18%, its TATO ratio (Sales/TA) is 1.50x, and its sales are$3,000,000. ABC's ROE is double its return on assets(ROA). ABC pays 10% interest on all debt and its tax rateis 40%. Calculate the company's ROA and ROE.

We will first calculate the company's ROA and then use that to find its ROE.Given information:-…

Answered: The operating profit margin…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The operating profit margin (EBIT/sales) of ABC, Inc. is 18%, its TATO ratio (Sales/TA) is 1.50x, and its sales are $3,000,000. ABC's ROE is double its return on assets (ROA). ABC pays 10% interest on all debt and its tax rate is 40%. Calculate the company's ROA and ROE.