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    Finance Uts (2023)

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    clarisaisabel
    The document defines the formula for return on equity (ROE) as the product of net profit margin, asset turnover, and equity multiplier. It then calculates these values for a company in 1997, 1998, and 1999 to determine the ROE for each year. In 1997, the ROE was 22.3%; in 1998 it was 34.3%; and in 1999 it was 26%.

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    Finance Uts (2023)

    Uploaded by

    clarisaisabel
    5 views1 page
    The document defines the formula for return on equity (ROE) as the product of net profit margin, asset turnover, and equity multiplier. It then calculates these values for a company in 1997, 1998, and 1999 to determine the ROE for each year. In 1997, the ROE was 22.3%; in 1998 it was 34.3%; and in 1999 it was 26%.

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    The document defines the formula for return on equity (ROE) as the product of net profit margin, asset turnover, and equity multiplier. It then calculates these values for a company in 1997, 1998, and 1999 to determine the ROE for each year. In 1997, the ROE was 22.3%; in 1998 it was 34.3%; and in 1999 it was 26%.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    5 views1 page

    Finance Uts (2023)

    Uploaded by

    clarisaisabel
    The document defines the formula for return on equity (ROE) as the product of net profit margin, asset turnover, and equity multiplier. It then calculates these values for a company in 1997, 1998, and 1999 to determine the ROE for each year. In 1997, the ROE was 22.3%; in 1998 it was 34.3%; and in 1999 it was 26%.

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    © All Rights Reserved
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    of 1

    ROE = (Net Profit Margin) x (Asset Turnover) x (Equity Multiplier)

    1997
    Net Profit Margin (NPM):
    NPM = Profit after Taxes / Net Sales
    NPM = 177,813 / 691,614 = 0.257

    Asset Turnover (AT):


    AT = Net Sales / Average Total Assets
    Average Total Assets = (Total Assets at the beginning of the year + Total Assets at the end of
    the year) / 2
    Average Total Assets = (1,150,158 + 1,696,984) / 2 = 1,423,571
    AT = 691,614 / 1,423,571 = 0.486

    Equity Multiplier (EM):


    EM = Average Total Assets / Total Shareholders’ Equity
    EM = 1,423,571 / 809,995 = 1.756

    ROE for 1997:


    ROE = 0.257 (NPM) x 0.486 (AT) x 1.756 (EM) = 0.223

    1998
    NPM = 518,828 / 2,034,561 = 0.254
    AT = 2,034,561 / [(1,696,984 + 1,736,497) / 2] = 1.187
    EM = [(1,696,984 + 1,736,497) / 2] / 1,265,040 = 1.347
    ROE = 0.254 (NPM) x 1.187 (AT) x 1.347 (EM) = 0.343

    1999
    NPM = 318,039 / 1,694,839 = 0.188
    AT = 1,694,839 / [(1,736,497 + 1,390,183) / 2] = 1.136
    EM = [(1,736,497 + 1,390,183) / 2] / 1,390,183 = 1.249
    ROE = 0.188 (NPM) x 1.136 (AT) x 1.249 (EM) = 0.26

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