DuPont Analysis. Torrid Romance Publishers has total receivables of $3 000 which represent 20
QUESTION
DuPont Analysis. Torrid Romance Publishers has total receivables of $3,000, which represent 20 days” sales, Total assets are $75,000, the firm”s net profit margin is 5 percent. Find the firm”s ROA and asset turnover ratio.
Solution: Total Receivables =$3000 Total Assets =$75000 Days Sales Outstanding = (Account Receivables/Sales)*365 So, Sales = $3000*365/20 = $54750 Net Profit Margin = Net Income/Net Sales Net Income = 5%*$54750 = $2737.5
Return on Assets (ROA) = Net Income/Total Assets = $2737.5/$75000 = 3.65% Asset Turnover Ratio = Net Sales/Total Assets = $54750/$75000 = 0.73 times
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