Question

Using the Du Pont method, evaluate the effects of the following relationships for the Butters

Corporation.  

a. Butters Corporation has a profit margin of 5.5 percent and its return on assets (investment) is 8.75 percent.  What is its assets turnover? (Round your answer to 2 decimal places.)

asset turnover ratio   ? times

b. If the Butters Corporation has a debt-to-total-assets ratio of 65.00 percent, what would the firm’s return on equity be? (Input your answer as a percent rounded to 2 decimal places.)

Return on Equity ? %

c. What would happen to return on equity if the debt-to-total-assets ratio decreased to 60.00 percent? (Input your answer as a percent rounded to 2 decimal places.)

Return on Equity ? %

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