A firm has sales of $500, total assets of $300, and a debt/equity ratio of 1. If its return on equity is 15%, what is its net income?

Name: A firm has sales of $500, total assets of $300, and a debt/equity ratio of 1. If its return on equity is 15%, what is its net income?
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Question

Quizplus · Accepted Answer

The debt/equity ratio of 1 implies that equity equals debt, so equity is $150 (since total assets are $300, and assets = debt + equity). With a return on equity of 15%, net income is 15% of $150, which is $22.50.

A Firm Has Sales of $500, Total Assets of $300