Crabbe Natural Resources Inc.has a profitability ratio of 0.21,an asset turnover ratio of .45,a gross margin of 42%,and a total asset to equity ratio of 1.90.What is the firm's ROE?

Question

Quizplus · Accepted Answer

The Return on Equity (ROE) can be calculated using the DuPont formula: ROE = Profitability Ratio * Asset Turnover Ratio * Equity Multiplier. Here, the Equity Multiplier is the Total Asset to Equity Ratio. So, ROE = 0.21 * 0.45 * 1.90 = 0.17955 or 17.96%.