How does this compare with the current ROA

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Reference no: EM132116177

A firm with annual sales of $60 million pays out 50% of its sales as cost of goods sold. Overhead amounts to $10 million. Labour and salaries are $14 million. Thus, a profit of $6 million is realised. Assets are $20 million, of which 20% are in inventories. a) If the firm can (1) increase sales volume, (2) raise price, (3) reduce labour and salaries, (4) decrease overhead, or (5) reduce the costs of goods sold, how much change (in percent) in each category would be required to increase the profit to $8 million? b) If prices of purchased materials (i.e. costs of goods sold) can be reduced by 6% percent, what return on assets can be realised? How does this compare with the current ROA?

Reference no: EM132116177

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