Concept #1: Ratios: Return on Equity (ROE)
Practice: XYZ Company had net sales during the period of $380,000 and net income of $60,000. If total equity was $480,000 at the beginning of the period and $720,000 at the end of the period, what is the company’s ROE?
Practice: A company has income before taxes of $100,000. Net sales are $400,000 and gross profit is $300,000. What is the ROE, assuming the company has a 40% tax rate, and average common equity was $900,000?