Seminar 10 Slides 1 .pptx - BUS 306: Financial Management...

BUS 306:
Financial Management
Seminar 10
Saad Aftab

Learning Outcomes
Profitability Ratios
Du Pont System
Asset Management Ratios
Book vs Market Value Ratios

Question

Keller Cosmetics maintains an operating profit margin of 8% and a sales-to-
assets ratio of 3. It has assets of $500,000 and equity of $300,000. Assume
that interest payments are $30,000 and the tax rate is 25%. Calculate the
Return on Assets.
x

Question Continued
 Keller Cosmetics maintains an operating profit margin of 8% and a
sales-to-assets ratio of 3. It has assets of $500,000 and equity of
$300,000. Assume that interest payments are $30,000 and the tax rate
is 25%. Calculate the Return on Equity.

Question
 Magic Flutes has total receivables of $3,000, which represent 20 days’
sales. Total assets are $75,000. The firm’s operating profit margin is
5%. Find the Sales to Assets and Return on Assets.
x