35A company wants to increase its return on equity ratio.How can this be accomplished?An increase in the amount of mortgage debtA decrease in the amount of preferred dividendsA decrease in the amount of net incomeAn increase in the amount of preferred stock dividendsNEXT 3ABOOKMARK

The ratio analysis helps to analyze the financial statements of the business on the basis of the…

Answered: 35 A company wants to increase its…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question 1 (i) If a company increased its share capital and reduced its long term debt, then gearing would: A. Reduce B. Stay the same C. Be eliminated D. Increase (ii) A common feature of a business with high gearing is: A. Shareholders receive lower dividends per share B. Profits increase when interest rates rise C. More difficult to raise additional debt finance D. All of the above
which one is correct please confirm? QUESTION 37 Which of the following statements is true concerning companies that do not pay dividends? a. The cost of equity capital can be estimated using the Capital Asset Pricing Model. b. The cost of equity capital is equal to the growth short-term rate of earnings per share. c. The dividend capitalization model can be used to determine an accurate cost of equity capital. d. None of these are correct
Which would increase a firm's return on equity? A. Issuance of 12% bonds and investing the proceeds to earn more than 12%. B. Increasing the size of cash dividends to shareholders. C. Increase in the firm's price earnings ratio D. Increase in market price of the firm's ordinary share E. none of the above
If a company sells new shares of stock to raise money, this will result in a ____ to the contributed capital accounts. A.Debit B.Credit
What is the impact to the market value of a company’s equity as its book value of equity increases
What effect would the calculation performed have in terms of shareholder value? In other words, suppose the company’s goal is to maximize shareholder value. How will increasing its dividend per share by 1.75 support or inhibit that goal? Be sure to justify reasoning.
Which statement is correct?a. The cost of debt is determined by taking the present value of the interest payments and principal times one minus the tax rate.b. The difference in computing the cost of capital between using the accumulated profits and issuance of new ordinary shares is the growth rate.c. Increase in flotation costs, increase in the company’s beta and increase in the expected inflation will all lead to d. increase the company’s weighted average cost of capital.e. Increasing the company’s dividend payout would mitigate the company’s need to raise new ordinary shares.f. none of the above

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35 A company wants to increase its return on equity ratio. How can this be accomplished? An increase in the amount of mortgage debt A decrease in the amount of preferred dividends A decrease in the amount of net income An increase in the amount of preferred stock dividends NEXT > BOOKMARK