M Chapter 3 Eoc problems x 0 How do you calculate retu x C ezto.mheducation.com/
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M Chapter 3 Eoc problems x 0 How do you calculate retu x C ezto.mheducation.com/hm.tpx Nathan Stephens FIN3210 Fall 2015: Fall 2015 MW 200PM FINANCE instructions l help Chapter 3 EOC problems k Question 7 (of 9 Save & Exit submit Time remaining: 2:09:55 7. 10.00 points Martinez, Inc., has a total debt ratio of .60, total debt of $320,000, and net income of $39,500. Required What is the company's return on equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16 Return on equity References eBook & Resources Worksheet Difficulty: Basic Learning Objective: 03-02 Compute and, more important, interpret some common ratios Check my work 7:49 PM 11/2/2015Explanation / Answer
Debt ratio=0.6
Total Debt=320,000
Net income = 39,500
Return on equity(ROE)
ROE or return on Equity = Net income/Total Equity
In the above formula we don’t know Total equity.
We will use the debt ratio to find this total equity.
Debt ratio = Total Debt/Total Equity
0.6 = 320,000/Equity
Thus total equity = 533,333.3$
Thus ROE = 39,500/533,333.33 = 0.07406 or 7.41%
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