DuPont Analysis Last year Mocha Java, Inc. had an ROA of 10%, a profit margin of 5%, and sales of $25 million. What is Mocha Java's total assets?
A) $0.125 m
B) $1.25 m
C) $12.5 m
D) $125 m

Question

Quizplus · Accepted Answer

DuPont Analysis formula for ROA is: ROA = Profit Margin x Asset Turnover. Given ROA = 10% and Profit Margin = 5%, we can find Asset Turnover = ROA / Profit Margin = 10% / 5% = 2. Asset Turnover = Sales / Total Assets, so Total Assets = Sales / Asset Turnover = $25 million / 2 = $12.5 million.

DuPont Analysis Last Year Mocha Java, Inc