7 Ebersol Mining has 6 million in sales its ROE is 12 and it

7. Ebersol! Mining has $6 million in sales, its ROE is 12%, and its total assets turnover is 3.2x. Common equity on the firm\'s balance sheet is 50% of its total assets. What is its net income?

Solution

Total Asset Turnover = Sales/Total assets

3.2 = $6,000,000/Total assets

Total assets = $1,875,000

Equity = $937,500 ($1,875,000×50%)

Net income:

= $937,500×12%

= $112,500