Q. 1 Y3K, Inc. has sales of $7425, total assets of $3,500, and a debt-equity ratio of 0.29. Assume the return on equity is 20% What is the net income? (DO NOT round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)
Y3K, Inc. has sales of $7425, total assets of $3,500, and a debt-equity ratio of 0.29. Assume the return on equity is 20%
What is the net income? (DO NOT round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16)
Given information,
Sales =$6,209
Total assets=$2,825
Debt-equity ratio(D/E)=1.10
Return on equity =11%
Return on equity(ROE) = (Profit margin)(Total asset turnover)(Equity multiplier)
= (Profit margin)(Sales / Total assets)(1 + D/E)
Therefore,
Profit margin = [(Return on equity)(Total assets)] / [(1 + D/E)(Sales)]
=[0.11*2,825]/[( 1 + 1.1)*6,209]
=310.75/13,038.9
=0.0238325
Hence,
Net income = Sales *profit margin
=$6,209* 0.0238
=$147.98
But I am getting an error saying this answer is complete but not entirely correct?
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