Question

A firm has a tax burden of 0.9,a leverage ratio of 1.1, an interest burden of 0.6, and a return-on-sales ratio of 13%. The firm generates $2.62 in sales per dollar of assets.

What is the firm's ROE?

Answer 1

the firm's ROE is 20%

Step-by-step explanation:

The tax burden is 0.9

The interest burden is 0.6

The return on sales margin is 13%

The turnover ratio is 2.62

The leverage ratio is 1.1

Calculate the ROE

ROE = 0.9 * 0.6 * 0.13 * 2.62 * 1.1

=0.2 or 20%