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Management · Q283

Financial Management

Graduate and Post Graduate · Management · question 283

Q283

Profit margin = 4.5%, assets turnover = 2.2 times, equity multiplier = 2.7 times then return on equity will be

A.
26.73%
Answer
B.
25.73%
C.
9.40%
D.
9.00%

Answer: Option A

Solution

Answer: Option A
Solution:
Return on Equity (ROE) = Net Profit Margin x Asset Turnover Ratio x Equity Multiplier.
= 4.5% x 2.2 x 2.7
= 26.73%