XYZ CorpHas a Profit Margin of 7 Percent, a Debt Burden

Multiple Choice

XYZ Corp.has a profit margin of 7 percent, a debt burden of .8, and has financed two-thirds of its assets through equity.What asset turnover ratio is necessary to achieve an ROE of 18 percent?

A) 1.26
B) 1.61
C) 2.14
D) 4.02 ROE = leverage ratio x asset turnover x profit margin x debt burden
) 18 = 1.5 x asset turnover x .07 x .8
) 18 = .084 asset turnover