Question

The Accessories Outlet has total equity of $257,000, sales of $508,000, total assets of $610,000 and a profit margin of 3.5 percent. What is the return on equity

Answer 1

6.92%

Step-by-step explanation:

Return on Equity = Net Income / Total Shareholders Funds × 100

Where,

Net Income = Sales × profit margin

= $508,000 × 3.5 %

= $17,780

Therefore,

Return on Equity = $17,780 / $257,000 × 100

= 6.92%