A Company Has Return on Assets of 10

question 90

Multiple Choice

A company has return on assets of 10%. Return on sales are 5%. The leverage ratio is 4.0. Following DuPont analysis, what is return on equity?

• A)5%
• B)10%
• C)40%
• D)20%

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Definitions:

NCI

Non-controlling interest (NCI) refers to the portion of equity interest in a subsidiary not owned directly or indirectly by the parent company.

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

Goodwill

An asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised.

NCI Adjustment

Adjustments made to the non-controlling interest in a subsidiary to reflect their proportionate share of the profits or losses.