Nadine Enterprises has total assets of $240,000, a debt-equity ratio of 0.60, and a return on assets of 9%. What is the return on equity?

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The debt-equity ratio is 0.60, which means for every $1 of equity, there is $0.60 of debt. This can be represented as Debt/Equity = 0.60. Rearranging this formula gives Equity = Debt / 0.60. The total assets of $240,000 are financed by both debt and equity, so Assets = Debt + Equity. Given the return on assets (ROA) is 9%, ROA = Net Income / Assets, and the return on equity (ROE) is Net Income / Equity. To find ROE, we first find Equity using the relationship between assets, debt, and equity. Since Assets = Debt + Equity and Assets = $240,000, and using the debt-equity ratio, we can solve for Equity. Let's denote Equity as E and Debt as D. From the debt-equity ratio, D = 0.60E. Since Assets = D + E = $240,000, substituting D = 0.60E into the assets equation gives 0.60E + E = $240,000, which simplifies to 1.60E = $240,000, so E = $150,000. The return on assets (9%) is calculated as Net Income / $240,000. To find the return on equity, we use the formula ROE = Net Income / Equity. Since Net Income = ROA * Assets = 0.09 * $240,000 = $21,600, then ROE = $21,600 / $150,000 = 0.144 or 14.4%.

Nadine Enterprises Has Total Assets of $240,000, a Debt-Equity Ratio