Last National, Inc. has a net profit margin of 12%, an equity multiplier of 2, sales of $575,000 and a ROE of 14.5%. What is Last National's total asset turnover?

Question

Quizplus · Accepted Answer

The formula for ROE is: ROE = Net Profit Margin * Total Asset Turnover * Equity Multiplier. Rearranging for Total Asset Turnover gives: Total Asset Turnover = ROE / (Net Profit Margin * Equity Multiplier). Substituting the given values: Total Asset Turnover = 0.145 / (0.12 * 2) = 0.6042.