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Compute the companys return on assets ratio

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Reference no: EM13533030

Mangrich International is considering a significant expansion to its product line. The sales force is excited about the opportunities that the new products will bring. The new products are a significant step up in quality above the company"s current offerings, but offer a complementary fit to its existing product line. Michael Powell, senior production department manager, is very excited about the high-tech new equipment that will have to be acquired to produce the new products. Linda Huang, the company"s CFO, has provided the following projections based on results with and without the new products.

Without New Products

With New Products

Sales

$10,000,000

$16,000,000

Net income

$500,000

$960,000

Average total assets

$5,000,000

$12,000,000

Instructions

(a) Compute the company"s return on assets ratio, profit margin ratio, and asset turnover ratio, both with and without the new product line.

(b) Discuss the implications that your findings in part (a) have for the company"s decision.

Reference no: EM13533030

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