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1 October, 15:35

A fire destroyed a large percentage of the financial records of a health system. You have the task of piecing together information to prepare a financial report. You have found the profit margin to be 5.4 percent. The sales were $4 million on total assets of $2 million and the debt financing was $800,000. Using the Du Pont equation, what was the organization's return on equity?

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  1. 1 October, 17:49
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    18.0

    Explanation:

    Net income = profit margin * sales = 5.4% * 4 million = 0.216 million

    Equity = total assets - debt = 2 million - 800,000 = 1.2 million

    ROE = net income / equity = 0.216 / 1.2 = 18%

    So answer is 18.0%
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