Question

Please adhere closely to the rounding instructions(in red). Thanks!

Question 5 2 pts Lion Inc., has sales of $2492, total assets of $800, and a debt-equity ratio of O.7. If its return on equity is 17%. What is Lion's Net Income? (Round final answer to 2 decimal places. Do not round intermediate calculations). Topic: Financial Ratios (DuPont Model)

Answer 1

Total shareholders equity + total liabilities = total assets
Debt to equity ratio = Total liabilities/Total shareholders equity
.7 = total liabilities/total shareholders equity
total liabilities == .7*(total shareholders equity)
Total shareholders equity + .7*(total shareholders equity) = total assets
Total shareholders equity*(1.7) = 800
Total shareholders equity = 800/(1.7)
Total shareholders equity = $470.59
Return on equity = Net income/total shareholders equity
.17 = Net income/470.59
Net income = (470.59*.17)
Net income = 80.0003
Lion's net income is equal to $80.00