Carter, Inc., a manufacturer of electrical supplies, has an ROE of 23.1 percent, a profit margin of

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Carter, Inc., a manufacturer of electrical supplies, has an ROE of 23.1 percent, a profit margin of 4.9 percent, and a total asset turnover ratio of 2.6 times. Its peer group also has an ROE of 23.1 percent but has outperformed Carter with a profit margin of 5.3 percent and a total assets turnover ratio of 3.0 times. Explain how Carter managed to achieve the same level of profitability as reflected by the ROE.


Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.
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Fundamentals of corporate finance

ISBN: 978-0470876442

2nd Edition

Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates

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