A firm has a return on equity of 25%. The total asset turnover is 2.4 and the profit margin is...

Question:

A firm has a return on equity of 25%. The total asset turnover is 2.4 and the profit margin is 8%. The total equity is $4,100. What is the amount of the net income?

Net Income :

Net income is computed at the bottom line of the income statement and it represents the profits generated by the company by its business operations and also from its nonoperating activities. Net income is derived by reducing from the revenues, all the costs including operating costs, nonoperating costs, and noncash expenses.

Answer and Explanation:

The amount of net income is $1,025.

Explanation:

As per the data:

  • Return on equity = 25%
  • Total equity = $4,100

Formula:

Return on equity = Net income / Total equity

0.25 = Net income / $4,100

Net income = $1,025


Learn more about this topic:

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What Is Net Income? - Definition & Formula

from OSAT Business Education (CEOE) (040): Practice & Study Guide

Chapter 69 / Lesson 5
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