Profitability and Asset Management Ratios You are thinking of investing in Ski Sports, Inc. You have only the following information on the firm at year-end 2011: net income = $50,000, total debt = $1 million, and debt ratio = 70%. What is Ski's ROE for 2011?
A) 2.94%
B) 3.49%
C) 7.14%
D) 11.67%

Question

Quizplus · Accepted Answer

ROE = Net Income / Shareholder's Equity = Net Income / (Total Assets - Total Debt)= $50,000 / ($1 million / 0.3) = $50,000 / $333,333.33 = 15%

Profitability and Asset Management Ratios You Are Thinking of Investing