Question

| Question 5 2 pts Lion Inc., has sales of $2550, total assets of $1021, and a debt-equity ratio of 0.7. If its return on equity is 13%. What is Lion's Net Income? (Round final answer to 2 decimal places. Do not round intermediate calculations). Topic: Financial Ratios (DuPont Model)

Answer 1

Lion Inc. has total assets = $1,021

And debt-equity ratio = 0.7

Therefore, total equity of the firm = total assets – total debt

Or total equity of the firm = Total assets / (1+ debt-equity ratio)

= $1,021/ (1+.7) = $600.59

Return on Equity (ROE) = 13%

We know that

Return on Equity (ROE) = Net income / Total equity   

OR

Net income = Return on Equity (ROE) * Total equity   

= 13% * $600.59

= $78.08

Lion’s net income is $78.08