Raynar Enterprises has total equity of $645,500, sales of $1.15 million, and a profit margin of 3.6 percent. What is the return on equity?

Question 2 options:

7.07%


6.44%


4.16%


6.41%


7.13%

To calculate **Return on Equity (ROE)**, the formula is:

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

We are given:
- **Sales** = $1,150,000
- **Profit Margin** = 3.6%
- **Total Equity** = $645,500

### Step 1: Calculate Net Income
Net Income is determined by multiplying the sales by the profit margin:

\[
\text{Net Income} = \text{Sales} \times \text{Profit Margin} = 1,150,000 \times 0.036 = 41,400
\]

### Step 2: Calculate ROE
Now, we use the formula for ROE:

\[
ROE = \frac{41,400}{645,500} \approx 0.0641 = 6.41\%
\]

### Answer:
The correct option is **6.41%**.

Would you like any further explanation or details?

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Here are 5 related questions you might find useful:
1. How is Return on Assets (ROA) calculated?
2. What are the key differences between ROE and ROA?
3. What are other methods to evaluate a company's financial performance?
4. How does a company's debt impact its Return on Equity?
5. What would happen to ROE if the profit margin increased?

**Tip:** Profit margin is a great indicator of efficiency—higher margins usually indicate that a company controls its costs well.

Raynar Enterprises has total equity of $645,500, sales of $1.15 million, and a profit margin of 3.6 percent. What is the return on equity?

Learn how to calculate the return on equity (ROE) for Raynar Enterprises, given total equity of $645,500, sales of $1.15 million, and a profit margin of 3.6%. This financial problem covers the ROE formula, net income calculation, and is suitable for Grades 11-12 or college-level students.

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