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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?

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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