Question

Reliable Cars has sales of $807,200, total assets of $1,105,100, and a profit margin of 9.68 percent. The firm has a total debt ratio of 64 percent. What is the return on equity?

Answer 1

Answer:

19.64%

Explanation:

The return on equity shall be determined through following mentioned formula:

Return on equity=Net profit/Equity

In the given question

Net profit=9.68%*$807,200=$78,136.96

Equity=Assets-Total Debt

          =$1,105,100-64%($1,105,100)

          =$397,836

Return on Equity=$78,136.96/$397,836

                           =19.64%