Calculating Return on Equity (ROE) for Komatsu
Komatsu has a 4.5 percent profit margin and a 15 percent dividend payout ratio. The asset turnover ratio is 1.6, and the assets-to-equity ratio is 2.5. To find out the return on equity (ROE) for Komatsu, we can use a specific formula. Let’s break it down step by step.
Given Data:
- Profit Margin: 4.5%
- Dividend Payout Ratio: 15%
- Asset Turnover Ratio: 1.6
- Assets-to-Equity Ratio: 2.5
Question:
What is the return on equity (ROE) for Komatsu?
Answer Choices:
- 1) 6.4%
- 2) 7.2%
- 3) 8.0%
- 4) 9.6%
What is the return on equity (ROE) for Komatsu?
The return on equity (ROE) for Komatsu is 18%, but the given answer choices do not match this calculation.
Explanation:
To calculate the return on equity (ROE) for Komatsu, we need to use the formula: ROE = Profit Margin x Asset Turnover x Assets-to-Equity Ratio. Given that Komatsu has a 4.5% profit margin, a 15% dividend payout ratio, a 1.6 asset turnover ratio, and a 2.5 assets-to-equity ratio, we can calculate the ROE as follows:
ROE = 4.5% x 1.6 x 2.5 = 18%
Therefore, the return on equity (ROE) for Komatsu is 18%. However, none of the given answer choices match this calculation, so it seems there may be an error in the provided options.