ACME Inc.has a profitability ratio of 0.11,an asset turnover ratio of 1.7,a price to earnings ratio of 17.4,and a total asset to equity ratio of 1.50.What is the firm's ROE?

Question

Quizplus · Accepted Answer

ROE can be calculated by multiplying profitability ratio with asset turnover ratio and then multiplying the product with the total asset to equity ratio.

ROE = Profitability ratio x Asset Turnover ratio x Total Asset to Equity ratio

ROE = 0.11 x 1.7 x 1.5

ROE = 0.28 or 28.05%

Therefore, the correct answer is Choice C.

ACME IncHas a Profitability Ratio of 0