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24 December, 22:48

Oscar's dog house has a profit margin of 5.6 percent, a return on assets of 12.5 percent, and an equity multiplier of 1.49. what is the return on equity

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  1. 24 December, 23:48
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    The return on equity of Oscar's dog house is 18.6% (=12.5%*1.49) based on the information shown on the question above. This problem can be solved using the DuPont identity which stated as Return on Equity = profit margin * asset turnover * equity multiplier and in this problem, we do not have the asset turnover ratio. We can make a simple alteration to the formula because of Return on asset = profit margin * asset turnover. Therefore, we will find a new formula which stated as RoE = (Return on asset*equity multiplier).
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