If Roten Rooters, Inc., has an equity multiplier of 1.53, total asset turnover o
ID: 2764582 • Letter: I
Question
If Roten Rooters, Inc., has an equity multiplier of 1.53, total asset turnover of 1.10, and a profit margin of 6.3 percent, what is its ROE? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
If Roten Rooters, Inc., has an equity multiplier of 1.53, total asset turnover of 1.10, and a profit margin of 6.3 percent, what is its ROE? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Explanation / Answer
Answer= ROE=10.65%
Equity Multiplier= Total Assets/Total Shareholder's equity 1.53= Total Assets/Total Shareholder's equity Total Shareholder's equity= Total Assets/1.53 Total Shareholder's equity= 0.653595 Total Assets Asset Turnover Ratio= Net sales/Total Assets 1.1= Net sales/Total Assets Net sales= 1.1 Total assets Profit Margin ratio Net Income/ Net Sales 0.063= Net Income/ Net Sales Net Income= 0.063 Net sales Net Income= 0.063*1.1 Net assets Net Income= 0.0693 Net assets ROE= Net Income/ Total Shareholder's equity ROE= Net Income/ Total Shareholder's equity ROE= 0.0693 Net assets/0.653595 Total Assets ROE= 10.65%