A firm has a debt-to-total asset ratio of 75%, $219,000 in debt, and net income of $47,450. Calculate return on equity. (Do not round intermediate calculations.)
Multiple Choice There is not enough information to calculate return on equity.
65%
85%
81%
Solving the question with given inputs.
Debt to total assets ratio |
75.00% |
Debt value |
219,000.00 |
Total assets (Debt value / debt to total assets ratio) |
292,000.00 |
Equity part (100 - Debt to total assets ratio) |
25.00% |
Equity value (Total assets x Equity part) |
73,000.00 |
Net income |
47,450.00 |
ROE (Net income / Equity value) |
65.00% |
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