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# Calculate Return on Equity & Profit Margin

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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?

#### Solution Preview

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.

\$2.19