Question

Assume you are given the following relationships for the Haslam Corporation: Sales/total assets 1.6 Return on assets (ROA) 4% Return on equity (ROE) 5% Calculate Haslam's profit margin and liabilities-to-assets ratio. Do not round intermediate calculations. Round your answers to two decimal places. Profit margin: % Liabilities-to-assets ratio: % Suppose half of its liabilities are in the form of debt. Calculate the debt-to-assets ratio. Do not round intermediate calculations. Round your answer to two decimal places. %

Answer 1

Answer and Explanation:

The computation is shown below:

Profit margin = Return on assets ÷ (Sales to total assets)

= 4% ÷ 1.6

= 2.50%

Liabilities-to-assets ratio = 1 - ROA ÷ ROE

= 1- 4 ÷ 5

= 20.00%

Debt-to-assets ratio = Haslam's liabilities-to-assets ratio × 50%

= 20% × 50%

= 10.00%