Oscar's has a profit margin of 5.6 percent, a return on equity of 18.63 percent, and...

Oscar's has a profit margin of 5.6 percent, a return on equity of 18.63 percent, and an equity multiplier of 1.49. What is the return on assets?

Expert Solution

The return on asset is computed as follows:

Return on equity = Profit margin x Equity multiplier x Return on asset

0.1863 = 0.056 x 1.49 x Return on asset

0.1863 = 0.08344 x Return on asset

Return on asset = 0.1863 / 0.08344

Return on asset = 2.23 Approximately

Please ask in case of any doubt.

jeff jeffy answered 2 years ago

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