SME Company has a debt-equity ratio of .70. Return on assets is 7.8 percent, and

Question

SME Company has a debt-equity ratio of .70. Return on assets is 7.8 percent, and total equity is $530,000. What is the equity multiplier? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Equity multiplier What is the return on equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Return on equity % What is the net income? (Do not round intermediate calculations. Round your answer to the nearest whole number, e.g., 32.) Net income $

SME Company has a debt-equity ratio of .70. Return on assets is 7.8 percent, and total equity is $530,000. What is the equity multiplier? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Equity multiplier What is the return on equity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.] Return on equity What is the net income? (Do not round intermediate calculations. Round your answer to the nearest whole number, e.g., 32.) Net income

Explanation / Answer

Debt-equity ratio=Debt/Equity

Hence debt=(0.7*530,000)=$371000

Total assets=debt+equity

=(371000+530,000)=$901000

1.Equity mutliplier=Total assets/equity

=(901000/530,000)=1.7

3.ROA=Net income/Total assets

Hence net income=(901000*7.8%)=$70278

2.ROE=Net income/Total equity

=(70278/530,000)=13.26%

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