The Blue Bird LTD has total assets of $223 500, a debt- equity ratio of 0.45, and return on equity is 12%. What is the net income?

$18,497

Explanation:

As per Accounting Equation;

Total Assets = Total Liabilities + Stockholders' Equity

Total Assets = $223,500

Suppose, If;

Total Liabilities = x, &

Stockholders' Equity = y, then above equation can be written as follows;

$223,500 = x + y Equation 1

Debt to Equity Ratio formula is as follows;

D/E = Total Liabilities / Stockholders' Equity

where, D/E = 0.45

Based on the assumptions the above equation can be written as follows;

0.45 = x / y

Multiply whole equation by 'y' we get;

x = 0.45y

Put the value of x in Equation 1 we get;

0.45y + y = $223,500

1.45y = $223,500

Divide the above equation by 1.45 we get;

y = $223,500/1.45

y = $154,137.93

which means Stockholders' Equity = $154,138

Now let's substitute the value of Stockholders' Equity in the Return on Equity Ratio formula to find the net income as follows;

ROE = Net Income / Stockholders' Equity

where, ROE = 12%

12% = Net Income / $154,138

Multiply the above equation by $154,138, we get;

Net Income = $154,138 x 12%

Net Income = $18,496.55

Hence Net Income of the Blue Bird LTD for the period would be $18,497.

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

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