Answer:
Equity multiplier = 1 + Debt−equity ratio
Equity multiplier = 1 + 0.25
Equity multiplier = 1.25
Total asset turnover = Sales / Total assets
Total asset turnover = $12,840 / $4,730
Total asset turnover = 2.71 times
ROE = (Profit margin)(Total asset turnover)(Equity multiplier)
0.14 = (Profit margin)(2.71)(1.25)
Profit margin = 0.0413 or 4.13%
Profit margin = Net income / Sales
0.0413 = Net income / $12,840
Net income = $529.76
The Sour Pickle Company has a debt-equity ratio of 1.37. Return on assets is 7.62 percent,...
The Sour Pickle Company has a debt-equity ratio of 1.37. Return on assets is 7.62 percent, and total equity is $685,000. a. What is the equity multiplier? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the return on equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the net income? (Do not round intermediate calculations and...
Shelton Company has a debt-equity ratio of 1.41. Return on assets is 7.66 percent, and total...
