A firm has net working capital of $350, total liabilities of $3,600, and total assets of $8,000.  During the year sales were $10,000, net income, was $650, and paid taxes of $200. What was the Return on Equity during the year?

To calculate the **Return on Equity (ROE)**, we need to use the formula:

\[
\text{ROE} = \frac{\text{Net Income}}{\text{Equity}} \times 100
\]

First, we need to determine the equity of the firm, which can be calculated as follows:

\[
\text{Equity} = \text{Total Assets} - \text{Total Liabilities}
\]

### Step 1: Calculate the firm's equity

\[
\text{Equity} = 8,000 - 3,600 = 4,400
\]

### Step 2: Calculate Return on Equity (ROE)

\[
\text{ROE} = \frac{650}{4,400} \times 100 = 14.77\%
\]

Therefore, the firm's Return on Equity (ROE) during the year is **14.77%**.

Would you like more details on any part of this? Here are 5 related questions:

1. How is Return on Equity used to assess a firm's financial performance?
2. What other profitability ratios are related to ROE, and how are they calculated?
3. What factors can influence a firm's Return on Equity?
4. How do changes in liabilities and assets affect a company's equity?
5. How does net income relate to other financial performance indicators?

**Tip:** A higher ROE typically indicates that the company is more efficient at generating profit from its equity. However, it’s important to also consider other financial ratios for a complete analysis.

A firm has net working capital of $350, total liabilities of $3,600, and total assets of $8,000. During the year sales were $10,000, net income was $650, and paid taxes of $200. What was the Return on Equity during the year?

Learn how to calculate Return on Equity (ROE) with a step-by-step example. This finance problem involves calculating equity from assets and liabilities and using net income to find ROE. Ideal for college-level students studying finance or accounting.

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