A London Ontario ﬁrm has a net income of $32,000 which provides a 12% return on assets. The ﬁrm has a debt-equity ratio of .40. What is the return on equity?
A) 7.20%
B) 8.57%
C) 11.67%
D) 12.00%
E) 16.80%

Question

Quizplus · Accepted Answer

The return on equity (ROE) can be calculated using the formula: ROE = Return on Assets (ROA) * (1 + Debt/Equity Ratio). Given ROA is 12% and the debt-equity ratio is 0.40, ROE = 12% * (1 + 0.40) = 16.80%.

A London Ontario ﬁRm Has a Net Income of $32,000