Given the following information, calculate the ROE. Sales = $350,000; Net Income = $50,000; Total assets...

Given the following information, calculate the ROE. Sales = $350,000; Net Income = $50,000; Total assets = $500,000; D/E = 1.5.

a. 30%

b. 20%

c. 15%

d. 25%

e. 10%

Solutions

Expert Solution

Given about a company,

Net Income = $50000

Total asset = $500000

D/E = 1.5

=> total equity = Total assets*(1/(1+D/E)) = 500000*1/2.5 = $200000

So, ROE = Net income/Total equity = 50000/200000 = 25%

Option d is correct.

jeff jeffy answered 2 years ago

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