The Cavo Company has an ROA of 8.7 percent, a profit margin of 8.75 percent, and an ROE of 14.75 percent. Requirement 1: What is the company’s total asset turnover? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Total asset turnover times Requirement 2: What is the equity multiplier? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Equity multiplier times Explanation: 1. One equation to calculate ROA is: ROA = (Profit margin)(Total asset turnover) We can solve this equation to find total asset turnover as: 0.087 = 0.0875(Total asset turnover) Total asset turnover = 0.99 times 2. Now, solve the ROE equation to find the equity multiplier which is: ROE = (ROA)(Equity multiplier) 0.1475 = 0.087(Equity multiplier) Equity multiplier = 1.70 times

The Cavo Company has an ROA of 8.7 percent, a profit margin of 8.75 percent, and an ROE of 14.75 percent.

Requirement 1:

What is the company’s total asset turnover? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Total asset turnover

times

Requirement 2:

What is the equity multiplier? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Equity multiplier

times

Explanation: 1.

One equation to calculate ROA is:

ROA = (Profit margin)(Total asset turnover)

We can solve this equation to find total asset turnover as:

0.087 = 0.0875(Total asset turnover)

Total asset turnover = 0.99 times

2.

Now, solve the ROE equation to find the equity multiplier which is:

ROE = (ROA)(Equity multiplier)

0.1475 = 0.087(Equity multiplier)

Equity multiplier = 1.70 times