If Epic, Inc. has an ROE = 25 percent, equity multiplier = 4, a profit margin of 12 percent, what is the total asset turnover ratio?
A) 0.0833
B) 0.192
C) 0.5208
D) 0.75

Question

Quizplus · Accepted Answer

The total asset turnover ratio can be found using the DuPont Identity, which is ROE = Profit Margin * Total Asset Turnover * Equity Multiplier. Rearranging for Total Asset Turnover gives Total Asset Turnover = ROE / (Profit Margin * Equity Multiplier). Substituting the given values: Total Asset Turnover = 0.25 / (0.12 * 4) = 0.5208.