The return on assets = 5.5%, Total assets $3,000 and common equity is $1,050 then the return on equity would be _________?
Correct answer: B. 0.1571
- A. 22275
- B. 0.1571
- C. 0.01925
- D. 1.925 times
Explanation
Using the DuPont relation, ROE = ROA × total assets/common equity = 0.055 × (3,000/1,050) = 0.1571, or 15.71%. The other numerical choices either omit the ratio conversion or use the wrong operation.
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