Answer:
a). The net income=$1.44 million
b). ROA=0.0923
c). ROE=0.155
Explanation:
a)
Step 1
The expression for the net income is as follows;
profit margin=net income/net sales
where;
net income=total revenue-expenses
total revenue is the capital generated from the operations of a business and
expenses is the cost that goes directly into the generation of revenue
In our case;
profit margin=8%=8/100=0.08
net income=unknown=i
net sales=$18 million
replacing;
0.08=i/18 million
i=18 million×0.08=$1.44 million
The net income=$1.44 million
b).
ROA is a financial ratio that can be expressed as;
ROA=net income/total assets
where;
ROA=return on asset
net income=$1.44 million
total assets=$15.6 million
replacing;
ROA=(1.44/15.6)=0.0923
ROA=0.0923
c).
ROE is a financial ratio that can be expressed as;
ROE=net income/shareholders equity
where;
ROE is the return on equity
net income=$1.44 million
shareholders equity=Assets-debt
and;
assets=$15.6 million
debt=$6.3 million
shareholders equity=(15.6-6.3)=9.3 million
replacing;
ROE=1.44 million/9.3 million
ROE=0.155
