Answer:
Return on equity = 35%
Explanation:
Return on equity is the proportion of the capital amount owned to owned to shareholders that is earned as profit. It is a measures of efficient the management in the use of equity capital to generate income for the investors.
It is calculated as follows:
Return on equity = (Operating income/equity capital)× 100
Sales/revenue =Asset turnover × total asset =1,400,000× 4 =5,600,000
Operating income = Return on sales × Turnover
= 5%× 5,600,000 =280000
Equity = Total assets - debt = 1,400,000 - 600,000= 800,000
Return on equity = (280,000/800,000)× 100 = 35%
Return on equity = 35%
