Question: Using the Du Pont method, evaluate the effects of the following relationships for the Lollar Corporation.

a. Lollar Corporation has a profit margin of 5 percent and its return on assets (investment) is 13.5 percent. What is its asset turnover ratio?

b. If the Lollar Corporation has a debt-to-total-assets ratio of 60 percent, what will the firm's return on equity be?

c. What would happen to return on equity if the debt-to-total-assets ratio decreased to 40 percent?