The Security Market Line (SML) is A) the line that describes the expected return-beta relationship for well-diversified portfolios only. B) also called the Capital Allocation Line. C) the line that is tangent to the efficient frontier of all risky assets. D) the line that represents the expected return-beta relationship. E) the line that represents the relationship between an individual security's return and the market's return.

BALANCE SHEET

ASSETS

Cash                                                       1410                

Accounts Receivable                               950

Prepaid insurance                                         110

Stock investments                                      1290

Inventory                                               1107

Equipment                                              2560

Accumulated Depreciation Equipment      -670  

Land                                                      3240

TOTAL ASSETS                                      9997

LIABILITIES  

Accounts Payable                       884

Income tax payable                185

Mortgage payable                     3640

Notes payable                       201

Salaries and wages payable      272

TOTAL LIABILITIES                    5182

NET EQUITY

Retained earnings (beginning)   1600  

Common stock                       1320  

Dividends                               -375

Net Income                               2270

TOTAL NET EQUITY    4815  

TOTAL LIABILITIES+TOTAL NET EQUITY9997  

INCOME STATEMENT

Sales revenue                        5240

Cost of goods sold                 -1110  

Gross Profit                                 4130  

Salaries and wages expense-650  

Insurance expense                 -260  

EBITDA                                        3220  

Depreciation expense                -285  

EBIT                                        2935  

Interest expense                        -450  

EBT                                               2485  

Income Tax expense                -215  

NET INCOME                              2270  

Explanation:

According to the accounting equation the total of the assets should be equal to the sum between the liabilities and net equity. One of the components of the net equity is the net income that can be visualized in the final line of the income statement.