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Calculate the ROE using the Strategic Profit Model for a company with the following data: Profit...

Calculate the ROE using the Strategic Profit Model for a company with the following data: Profit margin = 15% Total asset turnover = 1.2 Inventory turnover = 0.7 Equity multiplier = 1.3 Current ratio = 1.1

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Answer #1

Return on Equity (ROE) = Net Profit Margin x Asset Turnover Ratio x Equity Multiplier.

                                         = 0.15* 1.2 * 1.3

                                           = 0.234 or 23.4%

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