Question

Nestor's has net income of $315,000, total sales of $3.52 million, total assets of $4.4 million, and total equity of $1.98 million. What is the return on equity?

Answer 1

15.91%

Step-by-step explanation:

The computation of the return on equity is shown below:

= (Net income - interest expense) ÷ (total equity)

= ($315,000 - $0) ÷ ($1,980,000)

= ($315,000) ÷ ($1,980,000)

= 15.91%

We simply divide the net income by the total equity so that the return on equity could be calculated

It is always expresses in percentage form.