Which of the following will allow your firm to achieve its targeted 16% ROA with an asset turnover of 2.5?
A)a leverage ratio of.0667
B)a P/E ratio of 14
C)a return on equity of 25%
D)a profit margin of 6.4%

Question

Quizplus · Accepted Answer

The formula for ROA is profit margin x asset turnover. Rearranging this formula, we get profit margin equals ROA divided by asset turnover. Plugging in the values, we get 16%/2.5 = 6.4%. Therefore, D) a profit margin of 6.4%, is the best choice to achieve the targeted ROA.

Which of the Following Will Allow Your Firm to Achieve