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Question

  RSP Ltd has a net profit margin of 12% and a total asset turnover of 1.2 times and a financial leverage multiplier of 1.2 times. RSP Ltd’s return on equity is closest to:

A 12% Correct Answer Incorrect Answer
B 14.2% Correct Answer Incorrect Answer
C 17.3% Correct Answer Incorrect Answer
D 19.2% Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

Return on equity = (net income/sales) (sales/assets) (assets/equity) [DuPont Formula] (0.12)(1.2)(1.2) = 17.28~17.3%

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