Question

Y3K, Inc., has sales of $6,359, total assets of $2,975, and a debt–equity ratio of 1.10....

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.)

Homework Answers

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
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