QMS 202 Study Guide - Final Guide: Asset Turnover, Profit Margin, Capital Intensity

• School: Ryerson University
• Department: Quantitative Methods
• Course: QMS 202
• Professor: Gunawardena Egodawatte

Document Summary

To calculate return on equity (roe), we can use the following formula: = equity multiplier (profit margin total asset turnover) Roe= roa x equity multiplier(1 + debt/equity ratio) First, we need to calculate the retention ratio, r. Then, we can calculate the sustainable growth rate, g, as follows: g = Roe = profit margin total asset turnover equity multiplier. To calculate the debt-equity ratio, we can use the following formula: 1) debt-equity ratio = [equity multiplier] - 1. 1: holden corp. is currently operating at only 75 percent of fixed asset capacity. 456 inc has a profit margin of 12%. It has a capital intensity ratio of 0. 80 and its debt/equity ratio is 2. The company"s net income was ,000 and company paid a dividend of ,000. What is the sustainable growth rate?inverse the capital intensity ratio (1/0. 80) = 1. 25 and that is your total asset turnover ratio. 1+debt/equity ratio = equity multiplier so em is 3.