Last year Harrington Inc. had sales of $325,000 and a net income of $19,000, and its year-end assets were $250,000. The firm's total-debt-to-total-assets ratio was 45.0%. Based on the DuPont equation, what was the ROE?
A) 13.82%
B) 14.51%
C) 15.23%
D) 16.00%
E) 16.80%

Question

Quizplus · Accepted Answer

ROE = (Net Income / Sales) * (Sales / Total Assets) * (Total Assets / Total Debt) * (Total Debt / Equity)= (19,000 / 325,000) * (325,000 / 250,000) * (250,000 / (250,000 * 0.45)) * (250,000 * 0.45 / (250,000 - 250,000 * 0.45))= 0.0585 * 1.3 * 2.2222 * 1.1111= 0.1382= 13.82%

Last Year Harrington Inc