Question

Y3K, Inc., has sales of $6,359, total assets of $2,975, and a debt–equity ratio of 1.10. If its return on equity is 11 percent, what is its net income? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)

Answer 1

Net Income		$ 155.83
Working:
a.	Debt- Equity ratio		=	1.10
	or,
	Debt/ Equity		=	1.10/1
	or,
	Debt			1.10
	Equity			1.00
	Total			2.10
	As per Balance sheet equation,
	Assets	=	Liabilities + Equity
	So,
	Equity	=	(2975/2.10)*1.00
		=	1,416.67
b.
	Net Income		=	Equity x Return on Equity
			=	1,416.67	x	11%
			=	155.83