Profitability and Asset Management Ratios You are thinking of investing in Wave Runnerz,Inc.You have only the following information on the firm at year-end 2013: net income = $10 million,total debt = $65 million,and debt ratio = 35 percent.What is Wave Runnerz's ROE for 2013?
A)8.28 percent
B)15.38 percent
C)28.57 percent
D)43.96 percent

Question

Quizplus · Accepted Answer

ROE = Net income / Shareholder's equityShareholder's equity = Total assets - Total debtTotal assets = Total debt / Debt ratioTotal assets = $65 million / 0.35 = $185.71 millionShareholder's equity = $185.71 million - $65 million = $120.71 millionROE = $10 million / $120.71 million = 8.28%

Profitability and Asset Management Ratios You Are Thinking of Investing