Rick’s Travel Service has asked you to help piece together financial information on the firm for...
Rick’s Travel Service has asked you to help piece together financial information on the firm for the most current year. Managers give you the following information: sales are $8.4 million, total debt is $2.65 million, debt ratio is 50 percent, and ROE is 18.2 percent. Using the above information, calculate Rick’s ROA. (Round your answer to 2 decimal places.)
Homework Answers
Debt ratio = Total debt / total assets
Total assets = $2,650,000 / 0.50 = $5,300,000
Total Equity = Total Assets - total debt = $5,300,000 - $2,650,000 =
Total Equity = $2,650,000
ROE = Net income / equity
Net Income = $2,650,000 * 18.20% = $482,300
ROA = Net income / Total asset = $482,300 /$5,300,000
ROA = 9.10%
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