A Company Has Sales of $640,000, Net Profit After Taxes

question 75

Multiple Choice

A company has sales of $640,000, net profit after taxes of $23,000, a total asset turnover of 2.5 and an equity multiplier of 1.67. What is the return on equity?

• A) 15%
• B) 9.0%
• C) 8.1%
• D) 4.5%

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Definitions:

Monopolistically Competitive

A market structure characterized by many firms selling similar but not identical products, allowing for some degree of market power and product differentiation.

Five Forces Model

A model developed by Michael Porter that helps us understand the five competitive forces that determine the level of competition and profitability in an industry.

Competitive Forces

Refer to the various external factors that influence the level of competition in an industry, impacting how businesses operate and compete. This includes rivals, threat of new entrants, supplier power, buyer power, and threat of substitute products or services.

Rivals

Competitors within the same market who are vying for the same customers with similar products or services.