Assume the following relationships for the Brown Corporation: Sales / Assets 1.5 Return on assets (ROA) 3% Return on equity (ROE) 5% Calculate the firm’s profit margin and debt-to-assets ratio, assuming the company uses debt and common equity.

Assume the following relationships for the Brown Corporation: Sales / Assets 1.5 Return on assets (ROA) 3% Return on equity (ROE) 5% Calculate the firm’s profit margin and debt-to-assets ratio, assuming the company uses debt and common equity.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter3: Analysis Of Financial Statements

Section: Chapter Questions

Problem 8P

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Question

Assume the following relationships for the Brown Corporation:

                       Sales / Assets                                           1.5
Return on assets (ROA)                            3%
Return on equity (ROE)                            5%

Calculate the firm’s profit margin and debt-to-assets ratio, assuming the company uses debt and common equity.

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