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Henderson's Hardware has an ROA of 9%, a 7.5% profit margin, and an ROE of 18%. What is its total assets turnover? Do not round intermediate calculations. Round your answer to two decimal places. What is its equity multiplier? Do not round intermediate calculations. Round your answer to two decimal places.

Answer :

Answer:

1.2; 2

Explanation:

Given that,

ROA = 9%

Profit margin = 7.5%

ROE = 18%

Using DuPont analysis:

Return On Assets = Net Profit Margin × Asset Turnover

Return On Assets ÷ Net Profit Margin = Asset Turnover

0.09 ÷ 0.075 = Asset Turnover

1.2 = Asset Turnover

Return On Equity = ROA × Equity Multiplier

0.18 = 0.09 × Equity Multiplier

0.18 ÷ 0.9 = Equity Multiplier

2 = Equity Multiplier

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