Y3K, Inc., has sales of $2,900, total assets of $1,100, and a debt−equity ratio of .30. If its return on equit?
Y3K, Inc., has sales of $2,900, total assets of $1,100, and a debt−equity ratio of .30. If its return on equity is 15 percent, its net income is?
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Basic accounting equation
Assets = Liabilities + Equity
So if assets = 1,100, then liabilities + equity must = the same.
Liabilities / Equity = Debt--Equity Ratio
You'll have to use a little algebra here.
Let x = Equity
If x = Equity, then Liabilities would be 1,100 - x.
So now plug those amounts into the above formula
(1,100 - x) / x = 0.30
x = 846.15 Equity
1,100 - 846.15 = 253.85 Liabilities
Net Income / Equity = Return on Equity
Net Income / 846.15 = 0.15
Net Income = $126.92