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Homework answers / question archive / Torrid Romance Publishers has total receivables of $3,180, which represents 20 days' sales
Torrid Romance Publishers has total receivables of $3,180, which represents 20 days' sales. Total assets are $77,380. The firm's operating profit margin is 6.2%. Find the firm's ROA and asset turnover
ratio. (Use 365 days in a year. Do not round intermediate calculations. Round your final answers to 2 decimal places.)
Computation of the asset turnover ratio:-
Days sales outstanding = (Accounts receivables / Sales) * Days in a year
20 = ($3,180 / Sales) * 365
Sales = 365 * $3,180 / 20
= $58,035
Asset turnover ratio = Sales / Total assets
= $58,035 / $77,380
= 0.75 times
Computation of the ROA:-
ROA = Asset turnover ratio * Operating profit margin
= 0.75 * 6.2%
= 4.65%
