_____ a Company Now Has a Profit Margin for ROCE

Question

Examlex · Accepted Answer

The Answer is To compute the Return on Common Equity (ROCE), we can use the relationship between the profit margin, asset turnover, and financial leverage to determine the return on equity (ROE). The formula for ROE when considering these factors is:

ROE = Profit Margin × Asset Turnover × Financial Leverage

Given:
- Profit Margin = 6% (or 0.06 in decimal form)
- Asset Turnover = 1.5
- Financial Leverage (Capital Structure Leverage Ratio) = 2

Now, we can plug these values into the formula:

ROE = 0.06 × 1.5 × 2
ROE = 0.09 × 2
ROE = 0.18

Converting the decimal back to a percentage:

ROE = 0.18 × 100%
ROE = 18%

Therefore, the Return on Common Equity (ROCE) for the company is 18%.

_____ a Company Now Has a Profit Margin for ROCE

Short Answer

Correct Answer:
Answered by ExamLex AI

_____ a Company Now Has a Profit Margin for ROCE

Short Answer

Correct Answer:Answered by ExamLex AIShow Answer

Correct Answer:
Answered by ExamLex AI