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aliya0001 [1]
3 years ago
7

Mercier United has net income of $128,470. There are currently 32.67 days' sales in receivables. Total assets are $1,419,415, to

tal receivables are $122,306, and the debt-equity ratio is .40. What is the return on equity
Business
1 answer:
ladessa [460]3 years ago
7 0

Answer:

the return on equity is 12.67 %

Explanation:

Return on Equity = Net Income / Total Shareholders contribution × 100

where,

debt-equity ratio = 0.40

<em>this means</em>

Debt : Equity = 0.40 : 1

Total ratio = 0.40 + 1 = 1.40

thus,

Equity Weight  = 1/1.40 × 100

                         = 71.43 %

<em>Equity Value = Total Assets × Equity Weight</em>

                     = $1,419,415 × 71.43 %

                     = $1,013,888

therefore,

Return on Equity = $128,470 / $1,013,888 × 100

                            = 12.67 %

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