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24 June, 23:59

Torrid Romance Publishers has total receivables of $3,160, which represents 20 days' sales. Total assets are $73,000. The firm's operating profit margin is 6.0%. Find the firm's ROA and asset turnover ratio. (Use 365 days in a year. Do not round intermediate calculations. Round the asset turnover ratio to 2 decimal places. Enter the ROA as a percent rounded to 2 decimal places.)

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  1. 25 June, 00:14
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    4.74%

    Explanation:

    Data provided in the question:

    Total receivables = $3,160

    Day's sales in receivables = 20

    Total assets = $73,000

    Operating profit margin = 6.0%

    Now,

    Total sales = Total receivables * [365 : Day's sales in receivables ]

    = 3,160 * [ 365 : 20 ]

    = $57,670

    Assets turnover ratio = Total sales : Total assets

    = $57,670 : $73,000

    = 0.79

    Therefore,

    ROA = Assets Turnover ratio * Profit margin

    = 0.79 * 6.0%

    = 4.74%
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