20. Samuelson's has a debt-equity ratio of 40 percent, sales of $8,000, net income of $600,...

Question

Question

20. Samuelsons has a debt-equity ratio of 40 percent, sales of $8,000, net income of $600, and total debt of $2,400. What is

Answer 1

Answer #1

d. 10.00 percent

Step-1:Calculation of Value of Equity

Debt/Equity ratio	=	Debt	/	Equity
0.4	=	$ 2,400	/	Equity
Equity	=	$ 2,400	/	0.4
Equity	=	$ 6,000

Step-2:Calculation of return on equity

Return on equity	=	Net Income	/	Equity
	=	$ 600.00	/	$ 6,000
	=	10.00%

Answer 2

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