A company has a net profit margin of 12.0%, asset turnover of 0.6, and a liabilities-to-asset ratio of 55.0 percent. What is the ROE?
D/A =0.55 |
E/A=1-D/A=1-0.55=0.45 |
Equity multiplier=1/(E/A)=1/0.45=2.2222 |
DUPONT |
ROE = Net profit margin*total asset turnover*equity multiplier |
ROE%=0.12*0.6*2.2222 |
ROE% = 16 |
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