XYZ Corp.has an operating profit margin of 7%,a debt burden of .8,and has financed two-thirds of its assets through equity.What asset turnover ratio is necessary to achieve an ROE of 18%?
A) 1.26
B) 1.61
C) 2.14
D) 4.02

Question

Quizplus · Accepted Answer

ROE = leverage ratio × asset turnover × operating profit margin × debt burden0.18 = (1 / 0.67) × asset turnover × 0.07 × 0.8Asset turnover = 2.14

XYZ Corphas an Operating Profit Margin of 7%,a Debt Burden of of .8,and