Question

If Roten Rooters, Inc., has an equity multiplier of 1.52, total asset turnover of 1.20, and a profit margin of 6.2 percent, what is its ROE

Answer 1

Answer:

11.30%

Explanation:

Roten rooters have an equity multiplier of 1.52

The total assets turnover is 1.20

The profit margin is 6.2%

= 6.2/100

= 0.062

Therefore the ROE can be calculated as follows

= 0.062× 1.52×1.20

= 0.1130×100

= 11.30%

Hence the ROE is 11.30%

Answer 2

Answer:

The answer is 11.31 percent

Explanation:

ROE means Return on Equity. It is a Profitability ratio.

The most common formula for Return on Equity (ROE) is:

Net income / equity.

To calculate the Return on Equity (ROE) for this question, we use dupont formula:

Equity multiplier x total asset turnover x profit margin

= 1.52 x 1.2 x 0.062

0.1131

Expressed as a percentage is:

11.31 percent