An analyst has calculated the following ratios for a company:
| Operating Profit Margin | 17.5% |
| Net Profit Margin | 11.7% |
| Total Asset Turnover | 0.89 times |
| Return on Assets | 10.4% |
| Financial Leverage | 1.46 |
| Debt to Equity | 0.46 |
The company’s return on equity (ROE) is closest to:
B is correct. Using DuPont analysis, there are two ways to calculate ROE from the information provided:
ROE=Net profit margin×Asset turnover×Financial leverage=11.7×0.89×1.46=15.2.
ROE=ROA×Financial leverage=10.4×1.46=15.2.