By how much must a firm reduce its assets in order to improve ROA from 10% to 12% if the firm's operating profit margin is 5% on sales of $4 million?
A) $240,000
B) $333,333
C) $400,000
D)$516,167

Question

Quizplus · Accepted Answer

ROA = (sales/assets) × operating profit margin.10 = ($4,000,000/assets) × .05Assets = $2,000,000.12 = ($4,000,000/assets) × .05Assets = $1,666,667Reduction in assets = $2,000,000 - 1,666,667Reduction in assets = $333,333

By How Much Must a Firm Reduce Its Assets in Order