Sun Shade's has sales of $363,000,total assets of $323,500,and a profit margin of 14.6 percent.The firm has a total debt ratio of 54 percent.What is the return on equity?

Question

Quizplus · Accepted Answer

First, we need to calculate the net income:

Net income = Sales x Profit margin 
Net income = $363,000 x 0.146 
Net income = $53,058

Next, we need to find the equity:

Equity = Total assets - Total debt 
Equity = $323,500 x (1-0.54) 
Equity = $148,510

Finally, we can calculate the return on equity (ROE):

ROE = Net income / Equity 
ROE = $53,058 / $148,510 
ROE = 0.3571 or 35.71%

Therefore, the best answer is B) 35.61 percent, which is the closest approximation to our calculated ROE of 35.71%.

Sun Shade's Has Sales of $363,000,total Assets of $323,500,and a Profit