Question

If Wilkinson, Inc., has an equity multiplier of 1.61, total asset turnover of 2.3, and a profit margin of 4.1 percent, what is its ROE?

Answer 1

The answer is "0.1518, or 15.18%".

equity multiplier = 1.61
total asset turnover = 2.3
profit margin of 4.1% = 0.041
Return of equity (ROE) = profit margin x total asset turnover x equity multiplier
ROE = (.041)(2.3)(1.61)
= 0.1518, or 15.18%