Organic Chicken Company has a debt-equity ratio of .65. Return on assets is 8.5
ID: 2625864 • Letter: O
Question
Organic Chicken Company has a debt-equity ratio of .65. Return on assets is 8.5 percent, and total equity is $540,000. (Do not include the dollar sign ($) or the percent sign (%). Round your answers to 2 decimal places. (e.g., 32.16))
Organic Chicken Company has a debt-equity ratio of .65. Return on assets is 8.5 percent, and total equity is $540,000. (Do not include the dollar sign ($) or the percent sign (%). Round your answers to 2 decimal places. (e.g., 32.16))
The equity multiplier is _____ times, the return on equity is ______ percent and net income is_____ $.Explanation / Answer
equity multiplier = total asset/total equity
Debt/equity = 0.65
Debt/equity + 1= 0.65+ 1
equity multiplier = 1.65
return on equity = Return on assets*equity multiplier = 8.5%*1.65= 14.03%
net income = 14.03%*$540,000= $75735.00
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