Wholesale Grocer's has total assets of $580,000 and total liabilities of $375,000. Net sales for the year are $547,000 and the profit margin is 14 percent. What is the return on equity?
A) 10.6 percent
B) 23.3 percent
C) 31.2 percent
D) 37.4 percent
E) 44.6 percent

Question

Quizplus · Accepted Answer

Return on equity (ROE) is calculated as Net Income divided by Shareholder's Equity. First, calculate Net Income: $547,000 * 14% = $76,580. Then, calculate Shareholder's Equity: $580,000 - $375,000 = $205,000. Finally, ROE = $76,580 / $205,000 = 0.373, or 37.4 percent.

Wholesale Grocer's Has Total Assets of $580,000 and Total Liabilities