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Reliable Cars has sales of $807,200, total assets of $1,105,100, and a profit margin of 9.68 percent. The firm has a total debt ratio of 78 percent. What is the return on equity

Respuesta :

pedrocarratore

Answer:

32.14%

Step-by-step explanation:

Assets = Equity + Liabilities.

If the firm has a debt ratio of 78%, then it must have an equity ratio of 22%

The return on equity is given by:

[tex]ROE = \frac{Revenue* Margin}{Equity}[/tex]

For a margin of 9.68%, revenues of $807,200, and total equity of 22% x $1,105,100:

[tex]ROE = \frac{\$807,200*0.0968}{\$1,105,100*0.22}\\ ROE =0.3214= 32.14\%[/tex]

Reliable Cars has a return on equity of 32.14%.

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