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1 May, 00:56

Computer Geeks has sales of $618,900, a profit margin of 13.2 percent, a total asset turnover rate of 1.54, and an equity multiplier of 1.06. What is the return on equity?

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  1. 1 May, 01:07
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    It is 21.55%

    Explanation:

    Profit = 13.2% * $618,900

    =$81,694.80

    Asset turnover ratio = Sales/Total Assets

    Total Assets = Sales/Asset turnover ratio

    = $618,900/1.54

    = $401,883.12

    Equity Multiplier = Total Assets / Total stock's holder equity

    Total stock's holder equity = Total Assets / Equity Multiplier

    = $401,883.12 / 1.06

    = $379,135

    Return on Equity = Profit / Total stock's holder equity

    = ($81,694.80/$379,135) * 100%

    =21.55%
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