Question

A firm has a return on equity of 20 percent. The total asset turnover is 2.8 and the profit margin is 7 percent. The total equity is $6,000. What is the net income

Answer 1

The net income of the firm is $1,200

What is net income?

Net income refers to the amount an individual or business makes after deducting costs, allowances and taxes.

Net profit is also amount of money a business earns after deducting all operating, interest, and tax expenses over a given period of time.

First, we know that:

Return on equity

= Net income / Total equity

Fixing the given values, we'll have

20% = Net income / $6,000

Net income = $6,000 * 20%

Net income = $1,200

Therefore, net income of the firm is $1,200

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