Working with ratios Over the course of the first year, Niantic Labs has sales of

Question

Working with ratios Over the course of the first year, Niantic Labs has sales of $320, 200,000, ends the year with total assets of $71, 600,000, has a debt-equity ratio of 42.0%, and they have a return on equity of 9.0%. With those figures, what is their net income? You suspect that the DuPont identity could head you in the right direction for this problem... We know that: Sales = $320, 200,000 Total Assets = $71, 600,000 Debt-Equity Ratio = 42.00% Return on Investment = 9.00% Net Income = Enter your answer in dollars, e.g., 11, 111, 111.11 Use this white space for your calculations and/or showing your work. Scroll down for the next problem.

Explanation / Answer

Solution.

Calculation of Net income.

Given in question debt equity ratio = 42%

Financial equation = Total asset = Total Libility

So, Total libility is $71,600,000

Equity = $71,600,000 ( 1 - .42 )

= $4,152,8000

Return on equity = 9%

Net Income = $4,152,8000 x 9% = $3,737,520

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