Question

Guillory Group has sales of $363,000, total assets of

$323,500,and net profit margin of 14.6%.The firm has total debt
ratio of 54% What is return on equity?

Answer 1

The return on equity (ROE) for Guillory Group is 25.68%.

Step-by-step explanation:

To calculate the return on equity (ROE), we need to use the formula: ROE = Net Profit Margin x Total Asset Turnover x Equity Multiplier.

Given that the net profit margin is 14.6%, we can calculate the equity multiplier using the total debt ratio, which is 54%. The equity multiplier is the inverse of the debt ratio, so it would be 1/0.54 = 1.85

Plugging in the values: ROE = 0.146 x (363,000/323,500) x 1.85 = 0.2568, or 25.68%.