Manufacturer A has a profit margin of 2.2%, an asset turnover of 1.7 and an equity multiplier of 5.0. Manufacturer B has a profit margin of 2.5%, an asset turnover of 1.2 and an equity multiplier of 4.7.
How much asset turnover should manufacturer B have to match manufacturer A's ROE?
A) 1.59%
B) 3.18%
C) 2.23%
D) 1.27%

Question

Quizplus · Accepted Answer

A) ROE_A = 2.2 × 1.7 × 5.0 = 18.7; 18.7 / (2.5 × 4.7) = 1.59

Manufacturer a Has a Profit Margin of 2