Question

Cellar Wines has a debt-equity ratio of 0.54, sales of $728,700, net income of $94,900, and total debt of $382,000. What is the return on equity

Answer 1

13.42%

Step-by-step explanation:

Here is an solution to the question below.

Debt equity ratio = 0.54

Sales = $728700

Net income = $94900

Total debt = $382000

Total equity ratio = net income / (total debt/ debt equity ratio)

total debt/ debt equity ratio = 382000/0.54 = 707,407.4

Total equity ratio = 94900/707,407.4

= 0.1342 x 100

= 13.42%

This is the return on equity.