Question

All answers must be entered as formulas (using cell names)

Y3K, Inc., has sales of $5,783, total assets of $2,604, and a debt-equity ratio of .75. If its return on equity is 11 percent, what is its net income? 4 Total assets Sales Debt-equity ratio Return on equity 2,604 5,783 0.75 11% 10 Complete the following analysis. Do not hard code values in your calculations Profit margin Net income 12 14 15 16 19 20

Answer 1

Calculation of net income:

Let equity be "x"

then debt= 0.75*equity= 0.75x

Total assets= Debt+equity

2604= x+0.75x

2604= 1.75x

x= 2604/1.75= 1488

Equity= $1488

Net income= Return on equity*equity

Net income= 0.11*1488= $163.68

Calculation of profit margin:

Profit margin= net income/ sales*100

Profit margin= 163.68/5783*100= 2.83%

Profit margin= 2.83%