Last year Coral Gables Inc. had sales of $325,000 and a net income of $19,000, and its year-end assets were $250,000. The firm's total debt ratio was 60.0%. Based on the DuPont equation, what was the ROE

19%

Explanation:

Given: Sales: $325000

           Net Income: $19000

           Total asset: $250000.

            Total debt ratio= 60%

Remember; Dupoint equation´s ROE=

Now let´s find out total liability.

We know, Total liability=

⇒  Total liability=  

∴ Total liability= $150000.

Now, finding return on asset.

We know, return on asset=

⇒  return on asset=

∴ return on asset (ROA)= 0.076

Next finding equity multilier.

Shareholder´s equity=

⇒ Shareholder´s equity=

∴  Shareholder´s equity= $100000.

Equity multipier=

⇒ Equity multipier=  

∴ Equity multipier=  2.5

Finally, based on the DuPont equation. Finding return on equity (ROE).

ROE=

⇒ ROE=

∴  ROE=

Return on equity ratio is calculated to know how much profit a company can make out of investor´s money. Dupoint analysis is the method to analyze company´s ability to increase it´s ROE.

drop shippers;