Question

You have been asked to analyze First Union Bank. You have only the following information on the bank at year-end 2015: Net income is $300,000, total debt is $2.6 million, and the bank's debt ratio is 52 percent. What is First Union Bank's ROE for 2015? (Do not round Intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16)) Return on equity %

Answer 1

Ans.	Debt ratio = Total debt / Total assets
	52% = $2,600,000 / Total assets
	Total assets = $2,600,000 / 52%
	$5,000,000
	Total equity = Total assets - Total debt
	$5,000,000 - $2,600,000
	$2,400,000
	Return on equity (ROE) = Net income / Total equity * 100
	$300,000 / $2,400,000 * 100
	12.50%