What is the return on stockholders' equity for a firm with a net profit margin of 5.2 percent, sales of $620,000, an equity multiplier of 1.8, and total assets of $380,000?
A) 8.48%
B) 5.74%
C) 15.27%
D) 9.36%

Question

Quizplus · Accepted Answer

The return on stockholders' equity (ROE) can be calculated using the formula ROE = Net Profit Margin * Asset Turnover * Equity Multiplier. First, calculate the net income by multiplying the net profit margin by sales: 0.052 * $620,000 = $32,240. Then, find the asset turnover by dividing sales by total assets: $620,000 / $380,000 = 1.63. Finally, calculate ROE: 0.052 * 1.63 * 1.8 = 0.15276 or 15.27%.

What Is the Return on Stockholders' Equity for a Firm