D/TA 20.00% ROA 8.50% What is Firm's Return on Equity (ROE)? Answers: 10.27% 10.63% 11.09% 11.56%

Question

Question

D/TA		20.00%
	ROA		8.50%

What is Firm's Return on Equity (ROE)?

Answer 1

Answer #1

Debt/Total assets=0.2

Debt=0.2*Total assets

Total assets=debt+equity

equity=Total assets-0.2*Total assets

=0.8*Total assets

ROA=Net income/Total assets

Net income=0.085*Total assets

ROE=Net income/equity

=(0.085*Total assets)/(0.8*Total assets)

=10.63%(Approx).

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Answer 2

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