Financial Accounting 5.8: Firm X and Firm Y have debt-total asset ratios of 40% and 30% and returns on total assets of 9% and 11%, respectively. What is the return on equity for Firm X and Firm Y?
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- Company has return on assets 12.4% and debt-equity ratio is 0.25. What is ROE? Select one: a.35.43% b.9.18% c.9.3% d.15.5%Firm A and Firm B have debt/total asset ratios of 33 percent and 23 percent and returns on total assets of 7 percent and 10 percent, respectively. What is the return on equity for each firm? (Do not round Intermedlate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Firm A return on equity Firm B return on equityNeed help please provide Solutions with explanation
- Use the financial ratios of company A and company B to answer the questions below. Company A Company B Yr t+1 Year t Yr t+1 Year t Current ratio 0.55 0.59 0.56 0.55 Accounts receivable turnover 6.22 6.25 5.06 4.87 Debt to total assets 40.5% 40% 67.8% 65.9% Times interest earned 8.80 30.6 5.97 6.33 Free cash flows (in millions) ($3,819) $3,173 $168 $550 Return on stockholders’equity 7.7% 7.7% 26.6% 23.3% Return on assets 4.3% 4.3% 8.9% 7.9% Profit margin…STEP 3: Solve Calculating the four benchmark financial ratios found in Table 15.3, we get the following: Ratio with Ratio Existing Common Stock with Debt Financing Ratio Formula Ratio Financing Debt ratio Total Liabilities 35.2% 26.4% 51.5% Total Assets Interest-bearing Interest-Bearing Debt 20.1 15.1 40.2 debt ratio Total Assets Times interest Net Operating Income or EBIT 27.08 31.25 11.72 earned Interest Expense Depreciation Amortization 6.84 8.20 3.08 EBITDA Earnings Before coverage ratio Interest and Taxes Expense Expense Principal Payments Interest Expense + (- 1 Tax Rate STEP 4: Analyze Whether the entire $10 million is raised by issuing equity or by borrowing has a dramatic effect on the firm's capital structure. For example, the debt ratio will either drop from 35.2 percent to 26.4 percent if equity is used or increase to 51.5 percent if debt is used. The interest-bearing debt ratio will change in a similar manner, dropping from 20.1 percent to 15.1 percent if equity financing…Return on Equity Firm A and Firm B have debt-total asset ratios of 35 percent and 45 percent, respectively, and returns on total assets of 8 percent and 7 percent, respectively. Which firm has a greater return on equity?