I followed the above info and still am $900.00 off.
I was given the following info. Long Term Debt Ratio=.60
Current Ratio = 1.3
Current Liab = $900.00
Sales = $6590
Profit Margin = 9%
ROE = 16%
NI=6590*9% = 593.10
593.10/16% (roe) = 3706.88 (equity)
3706.88/.40=9267.20 (total Assets)
900.00 (CL) x 1.3 (current ratio) = 1170.00 (current assets)
9267.20 TA - 1170.00 CA = 8097.20.
What am I doing wrong? The answer is 8997.19

I am looking for the ROE
I have the following info
Total Debt Ratio = .70
Total Debt = 265,000
Net Income = 24,850
I don't even know how to start!

Quote:

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Originally Posted by legs1964

I followed the above info and still am $900.00 off.
I was given the following info. Long Term Debt Ratio=.60
Current Ratio = 1.3
Current Liab = $900.00
Sales = $6590
Profit Margin = 9%
ROE = 16%
NI=6590*9% = 593.10
593.10/16% (roe) = 3706.88 (equity)
3706.88/.40=9267.20 (total Assets)
900.00 (CL) x 1.3 (current ratio) = 1170.00 (current assets)
9267.20 TA - 1170.00 CA = 8097.20.
What am I doing wrong? The answer is 8997.19

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First of all you must post your question separately. The mistake lies in considering total assets as 9267.20. This actually is equity and long term debt.

Total assets equals 3706.88 + 5560.32 + 900 (CL) = 10167.20
Fixed assets equals 10167.20 - 1170 = 8997.20

Quote:

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Originally Posted by legs1964

I am looking for the ROE
I have the following info
Total Debt Ratio = .70
Total Debt = 265,000
Net Income = 24,850
I don't even know how to start!

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Please stop tagging on to some one's post. Too bad you do not know how to start. Try again, use your grey cells.

Well, there, I just moved it all to its own thread.

EDIT: Too bad I didn't notice it was two different problems, but I don't feel like trying to move it again.

It gets confusing when you've got more than one problem in the same thread. Next time please start a new thread for each new problem. Post on the same thread if you're still referring to the same problem.

Quote:

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Originally Posted by legs1964

I am looking for the ROE
I have the following info
Total Debt Ratio = .70
Total Debt = 265,000
Net Income = 24,850
I don't even know how to start!

---

Set up the equations involved and plug in what you have, and solve for what you don't have. That's essentially how the other one was solved. But you seem to have just followed a plug n chug, and not pay attention to why you were doing what you were doing. When you do that, you do not learn how to apply it to a new problem. Try this one without a list of steps to follow. We'll be happy to check it if you give it a shot.