Ask Question
8 September, 09:43

U KNO, Inc. uses only debt and common equity funds to finance its assets. This past year the firm's return on total assets was 19%. The firm financed 25% percent of its assets using debt. What was the firm's return on common equity? (Round your answer to two decimal places and state it in percentage form.)

+1
Answers (1)
  1. 8 September, 10:44
    0
    Return on Equity = 25.33%

    Explanation:

    Return on Total Asset = 19%

    Debt percent to assets = 25%

    Equity percent to assets = 100% - 25% = 75%

    Asset = 100%

    Return on Total Asset = Net Income / Total Assets

    19% = Net Income / 100%

    0.19 x 1.00 = Net Income

    Net Income = 0.19

    Return on Equity = Net Income / Equity

    Return on Equity = 0.19 / 75%

    Return on Equity = 0.19 / 0.75

    Return on Equity = 0.2533

    Return on Equity = 25.33%
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “U KNO, Inc. uses only debt and common equity funds to finance its assets. This past year the firm's return on total assets was 19%. The ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers