Marshall Networks, Inc. has a total asset turnover of 2.5 and a net profit margin of 3.5%. - 4041

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Marshall Networks, Inc. has a total asset turnover of 2.5 and a net profit margin of 3.5%. The firm has a return on equity of 17.5%. Calculate Marshall’s debt ratio. 

a.  30%

b.  40%

c.  50%

d.  60%

 

Use the following information and the percent-of-sales method to Answer questions 10 -12. 

Below is the 2004 year-end balance sheet for Banner, Inc. Sales for 2004 were $1,600,000 and are expected to be $2,000,000 during 2005. In addition, we know that Banner plans to pay $90,000 in 2005 dividends and expects projected net income of 4% of sales. (For consistency with the Answer selections provided, round your forecast percentages to two decimals.)

                 Banner, Inc. Balance Sheet

                       December 31, 2004

Assets

Current assets                                   $890,000

Net fixed assets                                     1,000,000

Total                                                    $1,890,000

Liabilities and Owners’ Equity

Accounts payable                                    $160,000

Accrued expenses                                        100,000

Notes payable                                              700,000

Long-term debt                                            300,000

Total liabilities                                       1,260,000

Common stock (plus paid-in capital)          360,000

Retained earnings                                        270,000

Common equity                                            630,000

Total                                                    $1,890,000

 
Solution Description

1.            Marshall Networks, Inc. has a total asset turnover of 2.5 and a net profit margin of 3.5%. The firm has a return on equity of 17.5%. Calculate Marshall’s debt ratio.

a.  30%

b.  40%

c.  50%

d.  60%