Ladders, Inc. has a net profit margin of 5.5 % on sales of $ 50.9 million. It has book value of equity of $ 40.9 million and total book liabilities of $ 28.6 million. What is Ladders' ROE? ROA? Note: Assume the value of Interest Expense is equal to zero.

Question

Libby Cohen

Business

25 March, 11:45

Ladders, Inc. has a net profit margin of 5.5 % on sales of $ 50.9 million. It has book value of equity of $ 40.9 million and total book liabilities of $ 28.6 million. What is Ladders' ROE? ROA? Note: Assume the value of Interest Expense is equal to zero.

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Answers (1)

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Jeffrey Lee · Answer 1

ROE=2.7995/40.9=6.84%

ROA=2.7995/69.5=4.03%

Explanation:

ROE

Return on equity of Ladder, Inc shall be calculated using the following formula:

ROE=Net profit/Equity

Net profit=5.5%*50.9=$2.7995 million

Equity=$40.9 million

ROE=2.7995/40.9=6.84%

ROA

Return on asset of Ladder, Inc shall be calculated using the following formula:

ROA=net profit/total assets

net profits=$2.7995 million

Total assets=Total equity+total liabilities

=40.9+28.6

=$69.5 million

ROA=2.7995/69.5=4.03%