Question

The Blue Bird LTD has total assets of $223 500, a debt- equity ratio of 0.45, and return on equity is 12%. What is the net income?

Answer 1

The Net Income For Blue Bird LTD. is $69362.

Step-by-step explanation:

As per Accounting Equation;

Total Asset = total equity + total liabilities

as we are don't have equity so we will take it as x and liabilities as y

Now our equation will be,

$223500 = x+y ........................................................................(i) equation

we are also given a debt equity ratio =
`(Total of Debt)/(Total of equity)`

Debt Equity Ratio =
`(Y)/(X)`

.45x = y................................................... (ii) equation

so now putting y of (ii) equation into (i) equation, we will get

$223500 = x+ .45x

x =
`(223500)/(1.45)`

x (i.e equity) = $154,138

and, y (debt ) = $69362

to find net income , where Return on equity (ROE) =
`(net income)/(shareholder equity)`

net income = .12×$154138

net income = $18497