Shelton, Inc., has sales of $13 million, total assets of $11 million, and total

Question

Shelton, Inc., has sales of $13 million, total assets of $11 million, and total debt of $6.4 million. Assume the profit margin is 6 percent.

What is the company's net income? (Do not round intermediate calculations. Enter your answer in dollars not in millions, e.g., 1,234,567.)

What is the company's ROA? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

What is the company's ROE? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Explanation / Answer

Profit Margin = Net income / sales
6% = Net income / 13
Net income = 13*0.06 = 0.78 million

Return on Assets = Net income / assets
= 0.78 / 11
= 0.07090
= 7.09%

Equity = assets - debt = 11-6.4 = 4.6
Return on Equity = Net income / equity
= 0.78 / 4.6
= 0.16956
= 16.96%

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