Question

Y3K, Inc., has sales of $7,565, total assets of $3,570, and a debt–equity ratio of .43. Assume the return on equity is 13 percent.

1.What is the company's equity multiplier?

Equity multiplier times _______

2.What is the company's total asset turnover?

Total asset turnover times _____

3.What is the company's profit margin?

Profit margin _____%

4.What is the company's net income?

Net income $_______

Answer 1

Ans:- (a) As per question Y3K Inc. has sales of $ 7565, has total assets of $3570 and a debt-equity ratio of.43 and also return on equity is given 13 percent.

In this part, we have to find the company's equity multiplier. equity multiplier is given by (1+debt/equity ratio).

Therefore the company's equity multiplier is given by (1 + 0.43) =1.43 is the required equity multiplier.

Ans: (b)- In this part, we have to find the company's total assets turnover and it is given by ( Net sales/Total assets).

Therefore the total assets turnover will be ( 7565/3570) = 2.12 (approx) is the required answer.

Ans -(c)Net Profit margin is given by Net profit margin =Return on equity/( Asset turn over*Equity multiplier)

  Therefore the net profit margin of the company will be 13%(2.12*1.43) =4.288 =4.29% (approx) is the required profit margin.

Ans- (d) Companys Net income is given by (sales*profit margin). sales is given in the question 7565 and profit margin is 4.29%. Therefore the required Net income of the company will be

Net Income = (7565*4.29%) = 324.5385 = $324.54(approx) is the required profit  margin.