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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

    Here the DuPont Formula is used to calculate the RoE Return on equity = (net income/sales) (sales/assets) (assets/equity) = (0.12) (1.2) (1.2) = 17.28~17.3%

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