DuPont Analysis Last year Café Creations, Inc. had an ROA of 25%, a profit margin of 12%, and sales of $4 million. What is Café Creations' total assets?
A) $0.12 m
B) $0.48 m
C) $1.00 m
D) $1.92 m

Question

Quizplus · Accepted Answer

ROA = Net Income / Total Assets
Profit Margin = Net Income / Sales

Given:
ROA = 25%
Profit Margin = 12%
Sales = $4 million

Using the DuPont formula:

ROA = (Profit Margin) x (Total Asset Turnover)
25% = 12% x (Total Asset Turnover)
Total Asset Turnover = 2.08

Total Assets = Sales / Total Asset Turnover
Total Assets = $4 million / 2.08
Total Assets = $1.92 million

Therefore, the correct answer is D) $1.92 million.

DuPont Analysis Last Year Café Creations, Inc