Sara Togas sells all its output to Federal Stores The following table shows selected financial data, in millions, for the two firms Calculate the sales to assets ratio, the profit margin, and the return on the two firms Now assume that the two companies merge If Federal continues to sell goods wort...

After the merger sales will be 100 assets will be 70 and ...

Sara Togas sells all its output to Federal Stores. The following table shows selected financial data, in

Question:

Sara Togas sells all its output to Federal Stores. The following table shows selected financial data, in millions, for the two firms:

Sales Profits Assets Federal Stores Sara Togas $10 $50 20 $100 20

Calculate the sales-to-assets ratio, the profit margin, and the return on the two firms. Now assume that the two companies merge. If Federal continues to sell goods worth $100 million, how will the three financial ratios change?

Financial Ratios
The term is enough to curl one's hair, conjuring up those complex problems we encountered in high school math that left many of us babbling and frustrated. But when it comes to investing, that need not be the case. In fact, there are ratios that,...