# Calculate Return on Equity & Profit Margin

Part 1

You are given the following information about a firm: The growth rate equals 8 percent; return on assets (ROA) is 10 percent; the debt ratio is 20 percent; and the stock is selling at $36. What is the return on equity (ROE)?

Part 2

Retailers Inc. and Computer Corp. each have assets of $10,000 and a return on common equity equal to 15%. Retailers has twice as much debt and twice as many sales relative to Computer Corp. Retailers' net income equals $750, and its total asset turnover is equal to 3. What is Computer Corp.'s profit margin?

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#### Solution Preview

Please see the attached Excel spreadsheet.

Part 1

Return on Equity = Net Income / Total Equity

Return on Assets = Net Income / Total Assets

Debt Ratio = Total Debt / Total Assets

Total Assets 50

Total Debt 10

Net Income 5

Total ...

#### Solution Summary

The expert calculates the return on equity and profit margins.