Question

Y3K, Inc., has sales of $6,329, total assets of $2,945, and a debt-equity ratio of 1.40. If its return on equity is 14 percent, what is its net income

Answer 1

See below

Step-by-step explanation:

The computation of net income is shown below:

ROE = Profit margin × Total asset turnover × Equity multiplier (Assets / Equity)

ROE = Profit margin × (Sales / total assets) × (1 + debt equity ratio)

14% = Profit margin × ($6,320 ÷ $2,945) × (1 + 1.40)