If you give me wrong answer, I will give you UN helpful rate. Last year, a company had $355,000 in assets,$26,275 of net income, and a debt-to-total-assetsratio of 44%. Now suppose the newly hired CFOconvinces the president to increase the debt ratioto 58%. Sales and total assets will not be affected,but interest expenses would increase. However,the CFO believes that better cost controls would besufficient to offset the higher interest expense andtherefore keep net income unchanged.Assuming the president of the firm allows the CFOto increase the debt ratio to 58%, what will be thenew ROE'?

Current Debt & Equity:Debt-to-assets ratio = 44%Debt = $355,000 × 44% = $156,200Equity =…

Answered: Last year, a company had $355,000 in…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 10P

See similar textbooks

Similar questions

None
Give true calculation for this question
Get Answer
Rowe and Company has a debt ratio of 0.50, a total assets turnover of 0.25, and a profit margin of 10 percent. The president is unhappy with the current return on equity, and he thinks it could be doubled. This could be accomplished (1) by increasing the profit margin to 14 percent and (2) by increasing debt utilization. Total assets turnover will not change. What new debt ratio, along with the 14 percent profit margin, is required to double the return on equity?
Provide solution for general accounting question
JunJun & Co. has debt ratio of 0.50, a total asset turnover of 0.25 and a profit margin of 10%. The president is unhappy with the current return on equity, and he thinks it could be doubled. This could be accomplished (1) by increasing the profit margin to 14% and (2) by increasing debt utilization. Total assets turnover will not change. What new debt ratio, along with the 14% profit margin, is required to double the return on equity? (SHOW SOLUTION) a. 0.75 b. 0.70 c. 0.65 d. 0.55
Roland & Company has a new management team that has developed an operating plan to improveupon last year’s ROE. The new plan would place the debt ratio at 55 percent, which will result ininterest charges of $7,000 per year. EBIT is projected to be $25,000 on sales of $270,000, it expects tohave a total assets turnover ratio of 3.0, and the average tax rate will be 40 percent. What does Roland& Company expect its return on equity to be following the changes?
(Financial forecasting-discretionary financing needs) J. T. Jarmon, Inc. has been in business for only 1 year, and the CFO expects that the relationship between firm sales and its operating expenses, current assets, net fixed assets, and current liabilities will remain at their current proportion of sales. Last year, Jarmon had $18,400,000 in sales and net income of $552,000. The firm anticipates that next year's sales will reach $21,160,000, with net income rising to $634,800. Given its present high rate of growth, the firm retains all its earnings to help defray the cost of new investments. The firm's balance sheet for 2018 is found in the popup window: total assets for 2019 and its discretionary financing needs (DFN). Using the information provided, make an estimate of Jarmon's financing requirements or What are Jarmon's financing requirements or total assets for 2019? (Round to the nearest dollar.) What are Jarmon's discretionary financing needs (DFN) for 2019? $ (Round to the…
Accounting Question
Quyox Sdn Bhd manufactures a special toy called Omma that are sold through a network of sales agents throughout Malaysia. The company sold 67,500 units of Omma in 2022 with equivalent to sales amounting to RM1,350,000. The sales agents are currently paid at 15% commission on sales. The following is the pro forma (projected) statement of profit or loss and other comprehensive income for the year ended 31 December 2022. Qu Yox Sdn Bhd Pro Forma Statement of Profit or Loss and Other Comprehensive Income For the Year Ended 31 December 2022 Sales Cost of Goods Sold: Variable Fixed Gross Profit Operating expenses: Sales Commision Fixed Advertising Expenses General and Administrative Expenses: Rental expenses Administrative Salaries Expenses Insurance Expenses Net Income 675,000 135,000 202,500 33,750 27,000 67,500 20,250 1,350,000 810,000 540,000 351,000 189,000
The Board of Directors is dissatisfied with last year's ROE of 15%. If the profit margin and asset turnover remain unchanged at 8% and 1.25 respectively, by how much must the total debt ratio increase to achieve 20% ROE? A. Total debt ratio must increase by 44% B. Total debt ratio must increase by 4% C. Total debt ratio must increase by 5% D. Total debt ratio must increase by 50%
Wagner Industrial Motors, which is currently operating at full capacity, has sales of $2,340, current assets of $680, current liabilities of $370, net fixed assets of $1,530, and a 5 percent profit margin. The firm has no long-term debt and does not plan on acquiring any. The firm does not pay any dividends. Sales are expected to increase by 10 percent next year. If all assets, short-term liabilities, and costs vary directly with sales, how much additional equity financing is required for next year? $172.30 $245.70 $234.00 $55.30 $11.70

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Intermediate Financial Management (MindTap Course…

Finance

ISBN:

9781337395083

Author:

Eugene F. Brigham, Phillip R. Daves

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS