y3K, Inc., has sales of $5,276, total assets of $3,105, and a debt–equity ratio of 1.40. If its return on equity is 15 percent, what is its net income?
Can someone help with a formula?
To calculate the net income of a company, you can use the formula:
Net Income = Return on Equity * Total Equity
To find the total equity, you need to subtract the total debt from the total assets. The formula for total equity is:
Total Equity = Total Assets - Total Debt
Given the following information:
Total Assets = $3,105
Debt-Equity Ratio = 1.40
To find total debt, you need to multiply the debt-equity ratio by the equity.
Total Debt = Debt-Equity Ratio * Total Equity
Once you have the total debt, you can substitute it into the formula for total equity:
Total Equity = Total Assets - Total Debt
Finally, you can substitute the values of total equity and return on equity into the net income formula to find the answer.
Net Income = Return on Equity * Total Equity
Let's calculate it step by step:
Step 1: Calculate the total debt
Total Debt = Debt-Equity Ratio * Total Equity
Total Debt = 1.40 * Total Equity
Step 2: Calculate the total equity
Total Equity = Total Assets - Total Debt
Total Equity = $3,105 - Total Debt
Step 3: Calculate the net income
Net Income = Return on Equity * Total Equity
Net Income = 15% * Total Equity
By following these steps, you should be able to calculate the net income of y3K, Inc.