CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

An analyst calculates the following ratios for a firm:

Sales/Total Assets: 2.8
Net Profit Margin (%): 4
Return on Total Assets (%): 11.2
Equity/ Total Assets: 0.625

The return on equity (in %) for this firm is closest to ______.
A. 11.2
B. 14.0
C. 17.9
Explanation: ROE = Net Profit Margin x Sales/Total Assets x Total Assets/Equity = 4.0 x 2.8 x 1/0.625 = 17.9%

Alternatively, ROE = Return on Total Assets x Total Assets/Equity = 11.2 x 1/0.625 = 17.9%.

User Contributed Comments 1

User Comment
cfastudypl Good question NA!
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