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12 April, 13:54

In response to complaints about high prices, a grocery chain runs the following advertising campaign: "If you pay your child $6 to go buy $50 worth of groceries, then your child makes twice as much on the trip as we do." You've collected the following information from the grocery chain's financial statements: (millions) Sales $ 586 Net income 32 Total assets 485 Total debt 393 What is the ROE for the store? (In %)

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  1. 12 April, 16:48
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    ROE : Net Income / Equity : $32 / $92 = 34,8%

    Explanation:

    To calculate the ROE its necessary to know the Equity of the company which is the difference between the Total Assets and the Total Debt.

    Total Assets : $485

    Total Debt : $393

    Equity : $92

    Net Income : $32

    ROE : Net Income / Equity : $32 / $92 = 34,8%

    The ROE it's a measure that let me know the financial performance of the company, its a good indicator of how efficiently the company it's handling the investor's money.
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