NEXT CES Problem 429 For the year ended June 30 2013 Norther

NEXT CES Problem 4.29 For the year ended June 30, 2013, Northern Clothing Company has total assets of $77,380,000, ROA of 11.96 percent, ROE of 19.02 percent, and a net profit m income and net sales? Calculate the firm\'s debt-to-equity ratio. (Round net income and net sales to the nearest dollar, e.g. 25 and Round debl-to-equity to 1 decimal The company\'s net income is $ Click if you would like to Show Work for this question: net sales are and the firm\'s debt-to-equity ratio is Open Show Work

Solution

ROA = Net Income/Total Assets

So, in question, 11.96% = Net Income/77,380,000

Net Income = 11.96% * 77,380,000 = $9,254,648 (Answer)

Net Profit Margin = Net Income/Sales

So, in question, 9.09% = 9,254,648/Sales

Sales = 9,254,648/9.09% = 101,811,309.13 (Answer)

ROE = Net Income/Total Equity

So, in question, 19.02% = 9,254,648/Total Equity

Total Equity = 48,657,455.31

Basic accounting equation says, Total Assets = Equity + Debt (Assuming no other liabilities other than debt exist)

101,811,309.13 = 48,657,455.31 + Debt

Debt = 53,153,853.82

Debt to Equity Ratio = 53,153,853.82/48,657,455.31 = 1.09x (Answer)