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1. Modell’s Inc. has total assets of $50 million, ROA of 16%, ROE of 15% and...

1. Modell’s Inc. has total assets of $50 million, ROA of 16%, ROE of 15% and a net profit margin of 15%. Based on the information above, what is the company's net income? (Please show your work)

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Answer #1

What is the company's net income?

Answer: $8 million

Working

Formula for calculating net income is as follows;

Net Income    = Total assets * Return on Assets

Where,

Total assets = $50 million

Return on assets (i.e. ROA) = 16%   

Calculation of Net Income

Net Income    = Total assets * Return on Assets

                        = $50 million * 16%

                        =$8 million

Note:

Formula used above to calculate Net income is derived from the formula for calculating Return on Assets;

Return on Assets (ROA)        = Net Income ÷ Total Assets

Return on Assets (ROA) * Total Assets = Net Income.

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