If a companys net profit margin is 5 percent, its total asset turnover is 1.5 times, and

Question:

If a company’s net profit margin is 5 percent, its total asset turnover is 1.5 times, and its financial leverage ratio is 1.2 times, its return on equity is closest to

a. 9.0 percent.

b. 7.5 percent.

c. 3.2 percent.

d. 1.8 percent. Sample Test Problems

Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.