3K, Inc., has sales of $7,565, total assets of $3,570, and a debt-equity ratio o

Question

3K, Inc., has sales of $7,565, total assets of $3,570, and a debt-equity ratio of .43. Assume the return on equity is 13 percent.

What is its equity multiplier? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

What is its total asset turnover? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

What is its profit margin? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places (e.g., 32.16).)

What is its net income? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

What is its equity multiplier? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Explanation / Answer

1)Asset side =Liability side + Equity

   3570 = .43 X + X

   1.43X=3570

X(Stockholder equity ) = 3570/1.43 = 2496.50

Debt =3570-2496.50 = 1073.50

Equity multiplier = Total asset/ Total stockholder equity

                             = 3570 /2496.50

                             = 1.43 times

2)Total asset turnover= Net sales/Average total asset

                               =7565/3570

                              = 2.12 times

3)net income =Shareholders equity * return on equity

                   = 2496.50 *.13

                   = $ 324.545

profit margin ratio = net income/net sales

                             = 324.545/ 7565

                             =.0429 or 4.29%

4)Net income = 324.55 approx [calculated in 3 above]

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