Y3K Inc has sales of 7395 total assets of 3485 and a debtequ

Y3K, Inc., has sales of $7,395, total assets of $3,485, and a debt-equity ratio of .26. Assume the return on equity is 17 percent.

What is its equity multiplier? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

What is its total asset turnover? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

What is its profit margin? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

What is its net income? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Solution

Y3K, Inc., has sales of $7,395, total assets of $3,485, and a debt-equity ratio of .26. Assume the return on equity is 17 percent.

a. What is its equity multiplier? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Equity multiplier =1+debt-equity ratio

Equity multiplier = 1+0.26

Equity multiplier = 1.26

b. What is its total asset turnover? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Total asset turnover = sales/Total Asset

Total asset turnover = 7395/3485

Total asset turnover = 2.12

c. What is its profit margin? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

Profit margin = Total Asset * 1/Equity multiplier * return on equity / sales

Profit margin = 3485 * 1/1.26 * 17%/7395

Profit margin = 6.36%

d. What is its net income? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Net income = Total Asset * 1/Equity multiplier * return on equity

Net income = 3485 * 1/1.26 * 17%

Net income = $ 470.20