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AA had a profit margin of 8%, a total assets turnover of 1.5 and an equity...

AA had a profit margin of 8%, a total assets turnover of 1.5 and an equity multiplier of 1.8. 1. Calculate company's ROE . 2. What can you say about this ROE if ROE's Industry Average is 15%

Solutions

Expert Solution

As per DuPont Formula,

ROE = Profit Margin(Asset Turnover)(Equity Multiplier)

ROE = 0.08(1.50)(1.8)

ROE = 21.60%

ROE is higher than industry average ROE

jeff jeffy answered 2 years ago
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