DuPont Analysis Last year Café Creations,Inc.had an ROA of 25 percent,a profit margin of 12 percent,and sales of $4 million.What is Café Creations' total assets?
A)$0.12m
B)$0.48m
C)$1.00m
D)$1.92m

Question

Quizplus · Accepted Answer

Using the Dupont Analysis formula:

ROA = Profit Margin x Asset Turnover

25% = 12% x Asset Turnover

Asset Turnover = 25% / 12% = 2.08

Sales = Profit Margin x Total Assets

$4 million = 12% x Total Assets

Total Assets = $4 million / 12% = $33.33 million

Therefore, Café Creations' total assets are:

$33.33 million x 0.25 (ROA) = $8.33 million

The closest answer choice to $8.33 million is D, $1.92 million.

DuPont Analysis Last Year Café Creations,Inc