(d) Delta GMBHs ROE is 8.9 percent. Sales are $2,956,000.00. Total debt ratio is 0.3743. Total debt is $964,000.00. Determine the return on assets (ROA)

Ans:

Total debt ratio = 0.3743

Total debt/Total assets = 0.3743/1

So Equity = 1 - 0.3743 = 0.6257

ROE = ROA X Total assets/Equity

8.9% = ROA x 1/0.6257

ROA = 5.5687% = 5.57%

Can i ask why Equity = 1 - 0.3743 = 0.6257? where to get 1?also, 8.9% = ROA x 1/0.6257, why total asets = 1?