Y3K, Inc., has sales of $4,400, total assets of $2,985, and a debt-equity ratio of 1.20. If its return on equity is 16 percent, what its net income?

$217.668

Explanation:

The computation of net income is shown below:-

ROE = Profit Margin × Total Asset Turnover × Equity Multiplier (Assets ÷ Equity)

ROE = (Profit Margin) × (Sales ÷ Total Assets) × (1 + Debt-Equity ratio)

16% = Profit margin × ($4,400 ÷ $2,985) × ( 1 + 1.20)

16% = Profit margin × 1.47 × 2.20

16% = Profit margin × 3.234

Profit margin = 16% ÷ 3.234

= 0.04947

Now as we know that

Profit margin = Net income ÷ Sales

0.04947 = net income ÷ $4,400

net income is

= $4,400 × 0.04947

= $217.668

you will have $2593.74 in 10 years if you set aside $1,000 at 10%

you will have $9321.91 in 20 years if you set aside $2000 at 8%

you will have $1469.32 in 5 years if you set aside $1000 at 8%

you will have $1296.87 in 10 years if you set aside $500 at 10%

you will have $239.66 in 15 years if you set aside $100 at 6%

you will have $4660.96 in 20 years if you set aside $1000 at 8%