What is the return on stockholders' equity for a firm with a return on sales of 5.2 percent, sales of $620,000, an equity multiplier of 1.8, and total assets of $380,000?

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Quizplus · Accepted Answer

Return on equity (ROE) is calculated as (Net Income / Equity). Net Income can be found by multiplying Return on Sales (5.2%) by Sales ($620,000), which gives $32,240. Equity can be found by dividing Total Assets ($380,000) by the Equity Multiplier (1.8), which gives $211,111.11. ROE = $32,240 / $211,111.11 = 15.27%.

What Is the Return on Stockholders' Equity for a Firm