Synovec Company has a debt–equity ratio of .85. Return on assets is 10.4 percent

Question

Synovec Company has a debt–equity ratio of .85. Return on assets is 10.4 percent, and total equity is $785,000. What is the company's equity multiplier? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) Equity multiplier What is the company's 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 company's net income? (Do not round intermediate calculations.)

Explanation / Answer

Debt-equity ratio=Debt/Equity

Hence debt=0.85*$785000

=$667250

Total assets=Debt+Equity

=$667250+$785000

=$1452250

ROA=Net income/Total assets

Hence net income=(1452250*0.104)=$151034

Equity multiplier=Total assets/Total equity

=$1452250/$785000=1.85

ROE=Net income/Total equity

=(151034/785000)=19.24%

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