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SSC Audit Tax Finance P-II QUESTION #6168
Question 1
A company reports a Profit Margin of 10%, Asset Turnover of 2.0, and an Equity Multiplier (Total Assets/Equity) of 1.5. What is the Return on Equity (ROE)?
  • 15%
  • 20%
  • 30%✔️
  • 45%
Correct Answer Explanation
Using DuPont Analysis: $ROE = \text{Profit Margin} \times \text{Asset Turnover} \times \text{Equity Multiplier}$. $0.10 \times 2.0 \times 1.5 = 0.30$ or 30%.