Shelton Company has a debt?equity ratio of 1.43. Return on assets is 7.68 percen

Question

Shelton Company has a debt?equity ratio of 1.43. Return on assets is 7.68 percent, and total equity is $715,000.
  
What is the equity multiplier? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Equity multiplier             times

What is the return on equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Return on equity             %

What is the net income? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Explanation / Answer

Debt-equity ratio=Debt/Equity

Hence debt=1.43equity

=(1.43*715000)=$1022450

Total assets=debt+equity

=(1022450+715000)=$1737450

ROA=Net income/Total assets

Hence net income=(1737450*0.0768)

=$133436.16

Equity multiplier=Total assets/Total equity

=(1737450/715000)

=2.43

ROE=Net income/Total equity

=$133436.16/715000

=18.66%(Approx).

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