Calculating Return on Equity (ROE) for Roten Rooters, Inc.

How can we determine the Return on Equity (ROE) for Roten Rooters, Inc.?

With an equity multiplier of 1.59, total asset turnover of 1.50, and a profit margin of 6.9 percent, what is its ROE?

Answer:

The Return on Equity (ROE) for Roten Rooters, Inc. is 15.59%.

To calculate the ROE for Roten Rooters, Inc., we need to consider the company's profit margin, total asset turnover, and equity multiplier. ROE is a key financial metric that reflects the company's performance in generating profits from shareholders' equity.

The ROE is calculated by multiplying the profit margin of 6.9% by the total asset turnover of 1.50 and the equity multiplier of 1.59. The formula for calculating ROE is: ROE = Profit Margin x Total Asset Turnover x Equity Multiplier.

In this case, the calculation would be: 6.9% x 1.50 x 1.59 = 15.59%. This means that for Roten Rooters, Inc., 15.59% of its profits are generated from shareholders' equity.

A higher ROE indicates that the company is effectively utilizing its equity to generate profits and is considered favorable by investors and analysts. It provides insight into the company's financial performance and management's efficiency.