Dew Point Dynamite Pty Ltd generated a 1.23 total asset turnover in its latest fiscal year on assets of $2 112 077.The firm has total liabilities of $950 997.The firm's net profit margin was 10.3%.What is Dew Point's return on equity? Round to the nearest 0.1%.
A)23.1%
B)12.6%
C)5.5%
D)18.2%

Question

Quizplus · Accepted Answer

23.1%To calculate the Return on Equity (ROE), we first need to find the Net Income and Shareholder's Equity. The formula for ROE is Net Income / Shareholder's Equity.1. Total Asset Turnover = Sales / Total Assets. Given a total asset turnover of 1.23 and assets of $2,112,077, we find Sales = 1.23 * $2,112,077 = $2,597,854.71.2. Net Profit Margin = Net Income / Sales. Given a net profit margin of 10.3%, we find Net Income = 10.3% of $2,597,854.71 = $267,579.23.3. Shareholder's Equity = Total Assets - Total Liabilities. Given total liabilities of $950,997, Shareholder's Equity = $2,112,077 - $950,997 = $1,161,080.4. ROE = Net Income / Shareholder's Equity = $267,579.23 / $1,161,080 = 0.2305 or 23.05%, rounded to 23.1%.

Dew Point Dynamite Pty Ltd Generated a 1