Question

Q1:

   Assets                                    $200 million

        Shareholder Equity           $100 million

        Sales                                       $300 million

        Net Income                          $15 million

        Interest Expense                $2 million

If ECE's net profit margin is 8%, then ECE's return on equity (ROE) is:

A. 24%

B. 10%

C. 12%

D. 30%

Q2:

If ECE's return on assets (ROA) is 12%, then ECE's return on equity (ROE) is: 12%, 10%, 22% or 18%?

Q3:

If ECE reported $15 million in net income, then ECE's Return on Equity (ROE) is:

A. 15.0%

B. 5.0%

C. 10.0%

D. 7.5%

**The answer regardless of the other info is 15% right? I think there was a typo in the work, but its all 15% right? even when i dont have the option? emailing instructor about it!*

Answer 1

Answer to Question 1.

Net Profit Margin = Net Income/ Sales * 100

8 = Net Income/ $300 Million * 100

Net Income = $24 Million

Return on Equity = Net Income/ Shareholders' Equity * 100

Return on Equity = $24 Million/ $100 Million *100

Return on Equity = 24%

Answer to Question 2.

Return on Assets = Net Income / Total Assets * 100

12 = Net Income / $200 Million * 100

Net Income = $24 Million

Return on Equity = Net Income/ Shareholders' Equity * 100

Return on Equity = $24 Million / $100 Million * 100

Return on Equity = 24%

Answer to Question 3.

Return on Equity = Net Income/ Shareholders' Equity * 100

Return on Equity = $15 Million/ $100 Million * 100

Return on Equity = 15.0%