Question

Komatsu has a 4.5 percent profit margin and a 15 percent dividend payout ratio. The asset turnover ratio is 1.6, and the assets-to-equity ratio (using formula) is 2.5. What is the return on equity (ROE) for Komatsu?

1) 6.4%
2) 7.2%
3) 8.0%
4) 9.6%

Answer 1

The return on equity (ROE) for Komatsu is 18%, but the given answer choices do not match this calculation.

Step-by-step explanation:

To calculate the return on equity (ROE) for Komatsu, we need to use the formula: ROE = Profit Margin x Asset Turnover x Assets-to-Equity Ratio. Given that Komatsu has a 4.5% profit margin, a 15% dividend payout ratio, a 1.6 asset turnover ratio, and a 2.5 assets-to-equity ratio, we can calculate the ROE as follows:

ROE = 4.5% x 1.6 x 2.5 = 18%

Therefore, the return on equity (ROE) for Komatsu is 18%. However, none of the given answer choices match this calculation, so it seems there may be an error in the provided options.