First we need the profit margin. We can do this with the following formula:
[tex]\text{profit margin = }\frac{net\text{ income}}{net\text{ sales}}[/tex]then, we have:
[tex]\text{profit margin = }\frac{400,000}{1,300,000}=0.31[/tex]Now we can find the return on equity (ROE) with the following expression:
[tex]\text{ROE}=\text{profit margin x total asset turnover x equity multiplier}[/tex]in this case we have the following:
[tex]\text{ROE}_{}=(0.31)(0.245)(1.20)=0.091[/tex]therefore, the return on equity is 9.1%
