Using the Du Pont method, evaluate the effects of the following relationships for the Butters Corporation. a. Butters Corporation has a profit margin of 6.5 percent and its return on assets (investment) is 16.25 percent. What is its assets turnover

The assets turnover is 2.54

Explanation:

To calculate the assests turnover we have to use the formula of ROA.

The ROA = Profit margin * Asset turnover ratio

Therefore the Asset turnover ratio = ROA / Profit margin

= 0.165 / 0.065

= 2.54. Asset turnover ratio

2.50%

Explanation:

Asset turn over ratio = net sales or revenue/average total assets

Net sales/revenue -- 16.25 percent or 16.25%

Profit margin/average total asset -- 6.5 percent or 6.5%

Asset turn over ratio = 16.25/6.5

= 2.50%

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