Question

Question 7 (1 point) During the latest year, Sky Inc. had total sales of $400,000, net income of 25,000, and its year-end total assets were $300,000. The firm's total debt to total assets ratio was 0.30, You can assume total debt is the same as total liabilities What is firm's return on equity (ROE)? Enter your answer as a percentage rounded to 2 decimal places. For example, enter 8.43 (9% ) instead of 0.0843. Your Answer:

Answer 1

Return on equity (ROE):

= Net income/Equity

- $25,000/($300,000×0.70)

= $25,000/$210,000

= 11.90%

Hence, return on equity is 11.90%

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