Computer Geeks has sales of $618,900, a profit margin of 13.2 percent, a total asset turnover rate of 1.54, and an equity multiplier of 1.06. What is the return on equity?

Question

Business

Kenzie Wilcox

6 October, 07:22

Computer Geeks has sales of $618,900, a profit margin of 13.2 percent, a total asset turnover rate of 1.54, and an equity multiplier of 1.06. What is the return on equity?

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Answers (1)

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Kaeden Cooke · Answer 1

It is 21.55%

Explanation:

Profit = 13.2% * $618,900

=$81,694.80

Asset turnover ratio = Sales/Total Assets

Total Assets = Sales/Asset turnover ratio

= $618,900/1.54

= $401,883.12

Equity Multiplier = Total Assets / Total stock's holder equity

Total stock's holder equity = Total Assets / Equity Multiplier

= $401,883.12 / 1.06

= $379,135

Return on Equity = Profit / Total stock's holder equity

= ($81,694.80/$379,135) * 100%

=21.55%