Inc. has a net profit margin of 5% on sales of $50 million. It has book value of equity of $40 million and total liabilities with a book value of $30 million. What is Ladders' ROE? ROA?

ROE = 6.25%

ROA = 3.57%

Explanation:

Sales = 50 million

Net Profit margin = 5%

Net profit = 50 million x 5% = 2.5 million

Total Assets = Total Equity + Total Liabilities

Total Assets = 40 million + 30 million = 70 million

Return on Equity = Net Profit / Total equity

Return on Equity = $2.5 million / $40 million = 0.0625 = 6.25%

Return on Assets = Net profit / total Asset

Return on Assets = 2.5 million / 70 million = 0.0357 = 3.57%