Given the following information, calculate the return on equity for Chaus, Inc.
Return on sales = 5%
Total asset turnover = 2
Debt ratio = .73
that depends whats the amount before that?
To calculate the return on equity (ROE) for Chaus, Inc., we need to use the formula:
ROE = Return on Sales * Total Asset Turnover * Equity Multiplier
Given information:
Return on Sales = 5%
Total Asset Turnover = 2
Debt Ratio = 0.73
1. Calculate the Equity Multiplier:
Equity Multiplier = 1 / (1 - Debt Ratio)
Equity Multiplier = 1 / (1 - 0.73) = 1 / 0.27 = 3.70
2. Substitute the values into the ROE formula:
ROE = 0.05 * 2 * 3.70 = 0.05 * 7.40 = 0.37 or 37%
Therefore, the return on equity (ROE) for Chaus, Inc. is 37%.