Excerpts from Dowling Company's December 31, 2018 and 2017, financial statements and key ratios are presented...

Excerpts from Dowling Company's December 31, 2018 and 2017, financial statements and key ratios are presented below (all numbers are in millions):

	2018			2017
Accounts receivable (net)	$	20		$	16
Net sales	$	115			100
Cost of goods sold	$	60			55
Net income	$	20			17
Inventory turnover		5.22
Return on assets		10.3	%
Equity Multiple		2.36

Dowling's return on equity for 2018 is (rounded):

		9%.
		24.3%.
		22%.
		17.4%.

Solutions

Expert Solution

Return om Equity = Return on asset × Equity multiplier

ROE = (Net income / Total assets )× (Total Assets / Equity)

Return on equity = 10.3% * 2.36

Return on equity = 24.308 or 24.3%

Option B .

jeff jeffy answered 2 years ago

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