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Du Communication has total assets of 912
Du Communication has total assets of 912.000 and a debt of 4500,000 t turns over his fixed assets 4 times a year. Its current assets are 5512.000 and return on sales marro percent What is its net income? What is its Return on Equity?
Expert Solution
| Total assets | 912000 | |||
| Debt | 500000 | |||
| Fixed asset turnover | 4 | times | ||
| Current assets | 512000 | |||
| Return on sales | 5% | |||
| Fixed asset turnover | Fixed assets/Sales revenue | |||
| 4 | (912000-512000)/Sales revenue | |||
| Sales revenue | 400000/4 | |||
| Sales revenue | 100000 | |||
| Net income | Sales revenue*Return on sales | |||
| Net income | 100000*5% | |||
| Net income | 5000 | |||
| Thus, net income is $5,000 | ||||
| Return on equity | Net income/Total equity | |||
| Return on equity | 5000/(912000-500000) | |||
| Return on equity | 5000/412000 | |||
| Return on equity | 1.21% | |||
| Thus, return on equity is 1.21% | ||||
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