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A firm has a debt-equity ratio of .62, a total asset turnover of 1.24, and a profit margin of 5.1 percent. The total equity is $489,600. What is the amount of the net income

Sagot :

The amount of net income is $50,158.93.

Given:

Debt ratio = 62%

Asset turnover = 1.24

Profit margin = 5.1%

Total equity = $489,600

Find the Total Debt:

Debt = debt ratio × total equity

Debt = 0.62 * 489,600

Debt = $303,552

Find the Total Assets:

Total assets = Total debt + Total equity

Total assets = $303,552 + $489,600

Total assets =  $793,152.

Find Total Turnover:

Turnover = Total assets * Total asset turnover ratio

= $793,152. * 1.24

= $983,508.48

Now find the amount of Net Income:

Net Income = Turnover * Profit margin

Net Income = $983,508.48 * 5.1%

= $50,158.93

The amount of net income is $50,158.93.

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