Martinez, Inc., has a total debt ratio of 0.49, total debt of $330,000, and net

Question

Martinez, Inc., has a total debt ratio of 0.49, total debt of $330,000, and net income of $42,000.

Required:

What is the company’s total assets? (Do not round intermediate calculations.Round your answer to the nearest whole number (e.g., 32).)

Total assets $

What is the company’s total equity? (Do not round intermediate calculations. Round your answer to the nearest whole number (e.g., 32).)

Total equity $

What is the company’s return on equity? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Return on equity %

Explanation / Answer

Debt Ratio = Total Debt / Total Assets
Total Assets = Total Debt / Debt Ratio => $330,000/0.49 = $673,469.39

Total Equity = $673,469.39 - $330,000 = $343,469.39

Return on Equity = Net Income/Total Equity => $42,000/$343,469.39 = 12.23%

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