Crabbe Natural Resources Inc. has a profitability ratio of 0.21, an asset turnover ratio of .45, a gross margin of 42%, and a total asset to equity ratio of 1.90. What is the firm's ROE?
A) 17.96%
B) 23.87%
C) 31.25%
D) 53.66%
Answer: A
Explanation: A) The ROE via the DuPont method is the profitability ratio × the total asset turnover × the total asset to equity ratio = 0.21 × .45 × 1.9 = 0.17955 = 17.96%
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