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Lee sun's has sales of $3,650, total assets of $3,350, and a profit margin of 5 percent. the firm has a total debt ratio of 41 percent. what is the return on equity? 5.00 percent 5.45 percent 10.83 percent 9.23 percent 4.45 percent

Respuesta :

Calculation of Return on Equity:


Return on Equity can be calculated using the following formula:


Return on Equity = Net Income / Equity


We can calculate net income using the following formula:

Net Income = Sales * Profit Margin = 3650*5% = $182.50


And we can calculate Equity using the following formula:

Equity = Total Assets * (1-Total Debt ratio) = 3350*(1-41%) = $1976.50


Now Finally,

Return on Equity = Net Income / Equity = 182.50 / 1976.50 = 9.23%



Hence the return on equity is 9.23%






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