Formula to calculate return on equity | ||||
ROE | Profit margin*Total asset turnover*Equity multiplier | |||
Using the above formula we can calculate profit margin | ||||
63% | Profit margin*1.3*(1+0.27) | |||
63% | Profit margin*1.3*1.27 | |||
63% | Profit margin*1.651 | |||
Profit margin | 63%/1.651 | |||
Profit margin | 38.2% | |||
Formula to calculate operating profit margin | ||||
Operating profit margin | Operating income/Sales | |||
Operating income | Net income/(1-tax rate) + Interest expense | |||
Operating income | 300000/(1-0.40) + 200000 | |||
Operating income | 500000+200000 | |||
Operating income | 700000 | |||
Operating profit margin | 700000/10000000 | |||
Operating profit margin | 7.00% | |||
Formula to calculate ROE | ||||
ROE | Return on assets*Equity multiplier | |||
ROE | 39%*(1+0.13) | |||
ROE | 44.1% |
Rippard's has a debt ratio of 27 percent, a total asset turnover ratio of 1.3 and...
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