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Phoenix's ROE

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The Phoenix Company has the following results:

Net Sales $7,000,000
Net Total Assets $5,000,000
Depreciation 200,000
Net Income 500,000
Long-Term Debt 2,500,000
Equity 1,800,000
Dividends 180,000

Compute Phoenix's ROE directly. Confirm this using the three components (ratios) combined

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Solution Summary

This provides the steps to calculate the Phoenix's ROE

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ROE = Net Income / Sales x Sales / Total Assets x Total Assets / Common Equity
=500000/7000000 * 7000000/5000000* 5000000/1,800,000
=0.071*1.4* 2.78

=0.276332= ...

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