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 profit margin of 15%
D) A profit margin of 6.4%

Question

Quizplus · Accepted Answer

ROA = Profit Margin * Asset Turnover 
16% = Profit Margin * 2.5 
Profit Margin = 6.4%

Therefore, the only choice that will allow the firm to achieve its targeted 16% ROA with an asset turnover of 2.5 is option D, which has a profit margin of 6.4%.

Which of the Following Will Allow Your Firm to Achieve