Question about return on assets and return on equity?

Question

If a company were to have annual sales of $10,000,000, maintains a net after tax profit margin of 5% and has a sales-to-assets ratio of 4, then:
1: what is the retun on assets?
2: If its debt/equity ratio is 0.5, what is the return on equity?


I want to make sure I'm getting the same answer!! Thanks.

Answer 1

1. Net Income is $500,000. Assets are $10,000,000/4 or $2,500,000 thus ROA is 500/2,500 or 20%

2. Debt + Equity must = Assets or 2,500,000 and Debt to Equity is 1:2 so debt is 833,333 and equity is 1,666,666. ROE is NI/Equity or 500,000/1,666,666 = 30%

Answer 2

3.75%