A firm has a debt to asset ratio of 75%, $240,000 in debt, and net income of $48,000. Calculate return on equity.

Name: A firm has a debt to asset ratio of 75%, $240,000 in debt, and net income of $48,000. Calculate return on equity.
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Question

Quizplus · Accepted Answer

The equity is 25% of total assets (since debt is 75%), which is $80,000. Return on equity is net income divided by equity: $48,000 / $80,000 = 60%.

A Firm Has a Debt to Asset Ratio of 75