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Chapter 2: 15BPb (page 80)

Using the Du Pont method, evaluate the effects of the following relationships for the Butters Corporation:

b. If the Butters Corporation has a debt-to-total-assets ratio of 50 percent, what

would the firm’s return on equity be?

Short Answer

Expert verified

Return on equity: 50.40%

Step by step solution

01

Debt-to-total asset ratio

The debt to total asset ratio is computed to compare the company’s debt obligation with the company’s total assets.

02

Calculate the return on equity

Returnonequity=Returnonassets1-DebtAssets=25.2%1-0.50=50.40%

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Most popular questions from this chapter

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