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:

Lump Sum

A large single payment made at a particular time, as opposed to multiple payments made over time.

Rate Of Return

The increase or decrease in value of an investment over a certain period, shown as a percent of the investment's original cost.

Compounded Annually

The process where the interest earned on an investment is reinvested, and future interest payments are calculated on the principal plus previously earned interest.

Ending Balance

The total amount remaining in an account at the conclusion of a reporting period or after a specific transaction has been completed.