A Firm Has a Return on Equity of 20% and a Total

question 96

Multiple Choice

A firm has a return on equity of 20% and a total asset turnover of 4. Assuming a debt ratio of 50% and sales of $1,000,000, calculate net income.

• A) $25,000
• B) $50,000
• C) $75,000
• D) $100,000

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Definitions:

Cost Structure

Cost structure denotes the various types of expenses a business incurs and is typically categorized into fixed and variable costs, influencing pricing and profitability.

Driver's Side Air Bag

A safety device installed in vehicles to reduce the risk of injury to the driver in the event of a collision by rapidly inflating upon impact.

Automobile Manufacturer

A company that produces and sells vehicles designed for transporting people and goods on roads.

Property Taxes

Taxes assessed on real estate properties, based on the property's value, and paid to local governments.