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Juan2020 · Jun 5, 2008, 01:25 PM

A store has 4,000,000 in yearly sales. The firm earns 3.5% on each dollar of sales and turnsits assets 2.5 times per year it has $100,000 in current liabilities and $300,000 in long term liabilities. What is its return on stockholder's equity

morgaine300 · Jun 5, 2008, 09:05 PM

$\text{ROE} = \frac{\text{Net profit}}{\text{Sales}}\, \times \,\frac{\text{Sales}}{\text{Assets}} \,\times \,\frac{\text{Assets}}{\text{Equity}}$

ROE = Profit Margin x Asset Turnover x Leverage

This is going to take some math work. Plug in what you know. For instance, you know profit margin, and you know sales. You can use that to solve for net profit. Etc. Eventually you'll get assets, and you'll be able to use that and the liabilities to solve for equity. And from there you can get the answer.

Give it a try.