Question

Health centers, inc., has total equity of $948,300, sales of $1.523 million, and a profit margin of 4.4 percent. what is the return on equity?

Answer 1

Calculation of Return on Equity:

Return on Equity can be calculated using the formula:

Return on Equity = Net Profit / Total Equity

It is given that sales is $1.523 million, and the profit margin is 4.4 percent, hence the Net Profit shall be 1,523,000 *4.4%= $67,012 Million =

And Total Equity is given $948,300

Hence,

Return on Equity = Net Profit / Total Equity

= 67012/948300

=0.0707

=7.07%

Hence Return on Equity is 7.07%