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In 2016, Turnpoint Inc. had net income of $400,000, assets of $5,000,000, sales of $2,000,000, and debt of 2,000,000. In 2017, Turnpoint Inc. had net income of $700,000, assets of $4,000,000, sales of $1,300,000, and debt of 2,000,000. Did Turnpoint Inc’s return on equity improve from 2016 to 2017?

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truonghanhduyen

Answer:

Yes, return on equity improved from 13.33% in 2016 to 35% in 2017

Explanation:

Equity in 2016 = assets of $5,000,000 - debt of $2,000,000 = $3,000,000

Return on equity in 2016 = $400,000/$3,000,000 = 13.33%

Equity in 2017 = assets of $4,000,000 - debt of $2,000,00 = $2,000,000

Return on equity in 2017 = $700,000/$2,000,000 = 35%

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