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Return on Equity and Net income

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1. A firm has a profit margin of 2% and an equity multiplier of 2.0. Its sales are$100 million and it has total assets of $50 million. What is its ROE?

2. Ebersoll mining has $6 million in sales; its ROE is 12%; and its total assetsturnover is 3.2x. The company is 50% equity financed. What is its net income?

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The solution computes ROE and Net income

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Solution 1

Equity Multiplier = Total Asset/Total Stockholder Equity;Net Income = Profit Margin * ...

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