DTO, Inc., has sales of $21 million, total assets of $19.1 million, and total debt of $6.8 million. Assume the profit margin is 8 percent. a. What is the company's net income?
b. What is the company's ROA? (Do not round intermediate calculations.
c. What is the company's ROE? (Do not round intermediate calculations

The answer is given below

Explanation:

a. What is the company's net income?

The net income net income is the Income of an entity minus the expenses, cost of goods sold, interest, depreciation and amortization, and taxes for the accounting period. In this case, the net income will be:

= 21,000,000 × 8%

= 21,000,000 × 0.08

= 1,680,000

b. What is the company's ROA?

The return on asset is calculated by dividing the net income by the total assets. This will be:

= 1,680,000/19,100,000

= 0.088

= 8.8%

c. What is the company's ROE?

The return on equity will be:

Total equity will be the total assets minus total liabilities. This will be:

= 19,100,000 - 6,800,000

=12,300,000

Return on equity will now be:

= 1,680,000/12,230,000

= 13.74%

c is the correct answer.

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