Oceanside Bank converts a dollar of equity into 10 cents of net income and has $9.50 in assets per dollar of equity capital. Oceanside also has a profit margin of 15 percent. What is Oceanside's AU ratio?

Question

Quizplus · Accepted Answer

AU ratio = (Net Income/Total Assets) * (Total Assets/Equity)

Given: 
- Net income = 10% of equity
- Total assets per dollar of equity = $9.50
- Profit margin = 15% = 0.15

Substituting the given values in the AU ratio formula, we get:

AU ratio = (0.10/9.50) * (1/0.15) = 0.00702 = 0.702%

Therefore, the answer is E) 7.02 percent.

Oceanside Bank Converts a Dollar of Equity into 10 Cents