Question

# Solve the problem. Please show steps a) Common Equity(C/E) is \$400,000(No Debt), Sales are \$600,000, NI...

Solve the problem. Please show steps a) Common Equity(C/E) is \$400,000(No Debt), Sales are \$600,000, NI is \$25,000, ROE goal 15% What profit margin needed to hit goal? b) NI is \$20,000. Year end assets are \$300,000 Liabilities to Assets ratio is 40% What is ROE?

a

 Profit margin% = Net income/sales Profit margin% = 25000/600000 Profit margin% = 4.17

b

Equity to asset =1-debt to asset = 1-0.4 = 0.6

equity = asset*equity to asset = 300000*0.6=180000

 ROE = Net income/total equity ROE% = 20000/180000 ROE% = 11.11

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