In the latest year, Photon, Inc. reported $276,000 in net income. The firm maintains a debt ratio of 30% and has total assets of $3,000,000. What is Photon's return on equity? (Round your percentage answer to one decimal place.)
A) 13.1%
B) 14.6%
C) 22.5%
D) 18.7%

Question

Quizplus · Accepted Answer

The correct answer is A.Photon's return on equity is calculated as follows:ROE = Net income / Shareholders' equityShareholders' equity = Total assets - Total debtTotal debt = Debt ratio * Total assetsTotal debt = 0.30 * $3,000,000 = $900,000Shareholders' equity = $3,000,000 - $900,000 = $2,100,000ROE = $276,000 / $2,100,000 = 13.1%

In the Latest Year, Photon, Inc