Calculation of the company’s return on equity:
The return on equity can be calculated with the help of following formula:
Return on Equity = Net income/ Equity
It is given that Carroll, Inc., has a total debt ratio of .50, total debt of $329,000. If the debt ratio is 0.50 it means the Equity shall be equal to Debt $329,000. It also says that the net income is $41,750.
Hence, Return on Equity = 41750/329000 = 0.1269 = 12.69%
Hence the company’s return on equity is 12.69%
