Explore BrainMass

Change in Return on Equity for Blease Inc

Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of 1.75. Its sales were $320,000 and its net income was $10,600. The CFO believes that the company could have operated more efficiently, lowered its costs, and increased its net income by $10,250 without changing its sales, assets, or capital structure. Had it cut costs and increased its net income by this amount, how much would the ROE have changed?

Solution Preview

ROE = Profit Margin X Asset Turnover X Equity Multiplier
Profit Margin = Net ...

Solution Summary

The solution explains how to calculate the change in ROE due to change in net income