Remi, Inc., has sales of $19 million, total assets of $14 million, and total debt of $4.8 million. If the profit margin is 8 percent. Requirement 1: What is net income? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).) Net income $ Requirement 2: What is ROA? (Do not round intermediate calculations. Enter your answer as a percent rounded 2 decimal places (e.g., 32.16).) ROA % Requirement 3: What is ROE? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).) ROE % Explanation: 1. To find the return on assets and return on equity, we need net income. We can calculate the net income using the profit margin. Doing so, we find the net income is: Profit margin = Net income / Sales 0.08 = Net income / $19,000,000 Net income = $1,520,000 2. Now we can calculate the return on assets as: ROA = Net income / Total assets ROA = $1,520,000 / $14,000,000 ROA = .1086, or 10.86% 3. We do not have the equity for the company, but we know that equity must be equal to total assets minus total debt, so the ROE is: ROE = Net income / (Total assets – Total debt) ROE = $1,520,000 / ($14,000,000 – 4,800,000) ROE = .1652, or 16.52%

Remi, Inc., has sales of $19 million, total assets of $14 million, and total debt of $4.8 million. If the profit margin is 8 percent.

Requirement 1:

What is net income? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)

Net income

$

Requirement 2:

What is ROA? (Do not round intermediate calculations. Enter your answer as a percent rounded 2 decimal places (e.g., 32.16).)

ROA

%

Requirement 3:

What is ROE? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

ROE

%

Explanation: 1.

To find the return on assets and return on equity, we need net income. We can calculate the net income using the profit margin. Doing so, we find the net income is:

Profit margin	=	Net income / Sales
0.08	=	Net income / $19,000,000
Net income	=	$1,520,000

2.

Now we can calculate the return on assets as:

ROA	=	Net income / Total assets
ROA	=	$1,520,000 / $14,000,000
ROA	=	.1086, or 10.86%

3.

We do not have the equity for the company, but we know that equity must be equal to total assets minus total debt, so the ROE is:

ROE	=	Net income / (Total assets – Total debt)
ROE	=	$1,520,000 / ($14,000,000 – 4,800,000)
ROE	=	.1652, or 16.52%