Question
A company’s ROE is 18%. Net profit margin is 12%,
asset turnover is 1.5 times. Calculate the equity multiplier.Solution
• ROE = Net margin × Asset turnover × Equity multiplier. 18% = 12% × 1.5 × EM → 0.18 = 0.18 × EM → EM = 1.0.
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Please hand me the book.
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