Bethesda Mining Company reports the following balance sheet information for 2013

Question

Bethesda Mining Company reports the following balance sheet information for 2013 and 2014. BETHESDA MINING COMPANY Balance Sheets as of December 31, 2013 and 2014 Suppose that the Bethesda Mining Company had sales cl $2,266,873 and net income of $98,381 for the year ending December31, 2014. Required: Calculate ROE using the Du Pont identity. (Do not round intermediate, calculations, Round your answers to 2 decimal places (e.g., 32.16). Enter the profit margin and return on equity as percents.) Profit margin Total asset turnover times Equity multiplier times Return on equity

Explanation / Answer

Dupont Equation:

ROE = Net profit Margin * Total asset turnover* Equity Multiplier

= (Profit/Sales) * (Sales/Assets) * (Assets/Equity)

= ($98,381/$2,266,873)*($2,266,873/$928,070)*($928,070/$422,121) = 0.2331 or 23.31%

ROE = 23.31%

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