Barrett, Inc., has a total debt ratio of .64, total debt of$324,000, and net income...

Barrett, Inc., has a total debt ratio of .64, total debt of $324,000, and net income of $40,500.

What is the company’s return on equity?

Expert Solution

Return on Equity, ROE = Net income/Total Equity

Debt ratio = Total Debt/Total Assets

Total Assets = Total Debt / Debt ratio

Total Assets = 324,000 / 0.64

Total Assets = 506,250

Total Equity = Total Assets - Total Debt

Total Equity = 506,250 - 324,000

Total Equity = $182,250

Return on Equity, ROE = Net income/Total Equity

ROE = 40,500/182,250

ROE = 0.2222222222

ROE = 22.22222222%

The company’s return on equity = 22.22222222%

jeff jeffy answered 2 years ago

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