CFA Practice Question

There are 191 practice questions for this study session.

CFA Practice Question

Compute the return on equity for a company with profit margin of 2%, total asset turnover of 6 times, and total assets divided by equity of 1.2.
A. 14.4%
B. 16.67%
C. Neither of the above is correct.
Explanation: The return on equity can be computed as the product of profit margin, total asset turnover, and financial leverage (measured as total assets divided by equity), or 2 x 6 x 1.2 = 14.4%.

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