### Financial Analysis Exercise: Calculating Return on Equity#### Problem StatementFirm A and Firm B have debt/total asset ratios of 33 percent and 23 percent, respectively, and returns on total assets of 7 percent and 10 percent, respectively. What is the return on equity for each firm?**Instructions:** Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).#### Calculation Table| | ||--------------|----------------------------|| **Firm A return on equity** | ____ % || **Firm B return on equity** | ____ % |#### ExplanationWhen calculating the return on equity (ROE), we use the formula:\[ \text{Return on Equity (ROE)} = \frac{\text{Return on Total Assets}}{1 - \text{Debt/Total Asset Ratio}} \]The table provided is for inputting your calculated ROE percentages for both Firm A and Firm B. Make sure to round the final answers to two decimal places.

Debt-total assets ratio = Total liabilities / Total assets Equity = Total assets - Total liabilities…

Firm A and Firm B have debt/total asset ratios of 33 percent and 23 percent and returns on total assets of 7 percent and 10 percent, respectively. What is the return on equity for each firm? (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Firm A return on equity Firm B return on equity

Firm A and Firm B have debt/total asset ratios of 33 percent and 23 percent and returns on total assets of 7 percent and 10 percent, respectively. What is the return on equity for each firm? (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Firm A return on equity Firm B return on equity

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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