Question

Henderson's Hardware has an ROA of 11%, a 8% profit margin, and an ROE of 21%. What is its total assets turnover? Do not round intermediate calculations. Round your answer to two decimal places.

Answer 1

Answer:

Total asset turnover = 1.375

Explanation:

In this question we use the DuPont analysis which is presented below:

Return On Assets = Net Profit Margin × Total asset turnover

0.11 = 0.08 × total assets turnover

So, the total assets turnover would be

= 0.11 ÷ 0.08

= 1.375

Simply we find out the asset turnover by applying the return on assets formula that is displayed above