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3 April, 18:23

B Corporation has an operating profit margin (EBIT/revenue) of 11%; an asset turnover ratio of 1.2; a financial leverage multiplier of 1.5 times; an average tax rate of 35%; and an interest burden of 0.8. B Corporation's return on equity is closest to:

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  1. 3 April, 19:29
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    The return on equity for B corporation is 19.8%

    Explanation:

    According to the Dupont formula the return on equity is a product of asset turnover ratio, financial leverage and profit margin.

    So in order to find the return on equity we have to multiply the profit margin, asset turnover ratio and financial leverage multiplier.

    0.11*1.2*1.5 = 0.198=19.8%

    The return on equity for B corporation is 19.8%
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