"Y3K, Inc., has sales of $6,359, total assets of $2,975, and a debt-equity ratio of 1.10. If its return on equity is 11 percent, what is its net income

Net income of Y3K, Inc. is $155.83

Explanation:

Debt-to-equity ratio is calculated by using formula:

Debt-to-equity ratio = Total debt (or liabilities)/Total equity

Total debt (or liabilities) = Debt-to-equity ratio x Total equity  = 1.1 x Total equity

Basing on accounting equation:

Total assets = Total liabilities + Total equity  = 1.1 x Total equity + Total equity = 2.1 x Total equity

Total equity = Total assets/2.1 = $2,975/2.1

Return on equity (ROE) = Net income/Total equity

Net income = Return on equity (ROE) x Total equity = 11% x ($2,975/2.1) = $155.83

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