Question

Y3K, Inc., has sales of $4,300, total assets of $3,160, and a debt-equity ratio of 1.40....

Y3K, Inc., has sales of $4,300, total assets of $3,160, and a debt-equity ratio of 1.40. If its return on equity is 11 percent, what its net income?

Multiple Choice

  • $144.83

  • $347.60

  • $38.40

  • $106.44

  • $473.00

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Homework Answers

Answer #1

Given,

Sales = $4300

Total assets = $3160

Debt-equity ratio = 1.40

Return on equity = 11%

Solution :-

Profit margin = [(return on equity) x (total assets)] [(1 + debt-equity ratio) x (sales)]

= [(11%) x ($3160)] [(1 + 1.40) x ($4300)]

= $347.60 [2.40 x $4300]

= $347.60 $10320 = 0.03368217

Now,

Net income = sales x profit margin

= $4300 x 0.03368217 = $144.83

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