Question

Please show all work

If UARE, Inc. has sales of 5000, total assets of 1310, a debt to equity ratio of 1.2 and a return on equity of 15 percent, what is UARE’s net income?

Answer 1

Let equity be X.

Debt equity ratio =Debt /equity

      1.2 =Debt /x

    Debt = 1.2*x =1.2 x

Total asset =Total debt +Total equity

      1310 = 1.2x +x

      1310 = 2.2 x

        x =1310/2.2

           = 595.45

Total equity = 595.45

Return on equity =net income /Total equity

   .15 = Net income /595.45

   Net income = 595.45*.15

                     = $ 89.3175    [rounded to 89.32]