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Le Sun's has sales of $3,000, total assets of $2,500, and a profit margin of 5%. The firm has an equity multiplier of 2.5. What is the return on equity?

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Tundexi

Answer:

Le Sun's return on equity is 15%

Explanation:

Assets turnover ratio = Net sales / Total fixed assets = $3,000 / $2,500 = 1.2 times

Return on Asset  = Profit margin * Total assets turnover

ROA= 5% * 1.2 times

ROA = 6%

Return on Equity= ROA * Equity multiplier

ROE= 6% * 2.5

ROE=  15%

Le Sun's return on equity is 15%

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