Question

The total assets for a logistics company are $4,000,000. Total liabilities for it are $3,000,000. Its...

The total assets for a logistics company are $4,000,000. Total liabilities for it are $3,000,000. Its total profits are $500,000. Calculate the company’s equity. Also calculate its return on equity.

Homework Answers

Answer #1

Solution: Total equity = 4000000 -3000000 =1000000

Total equity = Total asset - Total Liability. The total asset is only because of liability and asset in the business. And we know that in the balancesheet asset should be equal to liability. So the liability side of the business is divided in two parts : One is owners fund which is also known as equity and other is the borrowed funds.When we add both of these two we should get total asset in the firm.

Return on equity = TOTAL PROFIT / Equity = 5000000/1000000 = 5.

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