Homework Answers
Answer : c. 37%
=> Debt ratio = TD/TA = 0.73 or (TA - EQ) / TA = 0.73--- (i)
Total assets turnover = TS/TA = 2 or TA = TS/2 ----(ii)
Putting the value of (ii) in (i), we get
(TS/2) - EQ / (TS/2) = 0.73
=> (TS/2) - EQ = 0.73 (TS/2)
=> EQ = 0.27 * TS/2 OR TS = EQ/0.135 ----(iii)
NP RATIO = NP/TS = 5% ----- (iv)
Putting the value of (iii) in (iv), we get
NP/ (EQ/0.135) = 0.05
=> ROE = NP/EQ = 0.05/0.135 = 0.37 OR 37%
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