The correct answer is A. 26.73%.
Return on equity (ROE) is a measure of how profitable a company is relative to its equity. It is calculated by dividing net income by shareholders’ equity.
Net income is the company’s profit after taxes. It is calculated by taking revenue and subtracting expenses, including cost of goods sold, operating expenses, and interest expense.
Shareholders’ equity is the company’s total assets minus its total liabilities. It is the amount of money that would be left over if the company sold all of its assets and paid off all of its debts.
The formula for ROE is:
ROE = Net Income / Shareholders’ Equity
In this case, the profit margin is 4.5%, the assets turnover is 2.2 times, and the equity multiplier is 2.7 times. This means that for every $1 of sales, the company makes $0.045 in profit. For every $1 of assets, the company generates $2.20 in sales. And for every $1 of equity, the company has $2.70 in assets.
To calculate ROE, we can use the following formula:
ROE = (Net Income / Shareholders’ Equity) * (Assets Turnover) * (Equity Multiplier)
ROE = (0.045) * (2.2) * (2.7) = 26.73%
Therefore, the return on equity for this company is 26.73%. This means that for every $1 of equity, the company generates $0.2673 in profit.