A firm has an ROE of 14% and a debt ratio of 40%. If the total asset turnover is 3.4, what is the firm's profit margin?
A) 2.47%
B) 3.86%
C) 4.29%
D) 5.67%

Name: A firm has an ROE of 14% and a debt ratio of 40%. If the total asset turnover is 3.4, what is the firm's profit margin? A) 2.47% B) 3.86% C) 4.29% D) 5.67%
Brand: Quizplus
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Question

Quizplus · Accepted Answer

ROE = Profit Margin * Total Asset Turnover * Equity Multiplier14% = Profit Margin * 3.4 * (1 - 0.4)Profit Margin = 14% / (3.4 * 0.6) = 2.47%

A Firm Has an ROE of 14% and a Debt