Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of 1.75. Its sales were $310,000 and its net income was $9,000. The firm finances using only debt and common equity, and its total assets equal total invested capital. The CFO believes that the company could have operated more efficiently, lowered its costs, and increased its net income by $11,000 without changing its sales, assets, or capital structure. Had it cut costs and increased its net income by this amount, how much would the ROE have changed? Do not round your intermediate calculations. a. 6.76 p.p. b. 6.21 p.p. c. 3.55 p.p. d. 4.72 p.p. e. 8.26 p.p. The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. Balance Sheet (Millions of $) 2021 Assets Cash and securities $ 5,400 Accounts receivable 15,000 Inventories 15,600 Total current assets $ 36,000 Net plant and equipment 24,000 Total assets $ 60,000 Liabilities and Equity Accounts payable $ 17,446 Accruals 11,154 Notes payable 7,000 Total current liabilities $ 35,600 Long-term bonds 10,000 Total liabilities $ 45,600 Common stock 2,880 Retained earnings 11,520 Total common equity $ 14,400 Total liabilities and equity $ 60,000 Income Statement (Millions of $) 2021 Net sales $ 108,000 Operating costs except depreciation 100,440 Depreciation 1,920 Earnings before interest and taxes (EBIT) $ 5,640 Less interest 1,020 Earnings before taxes (EBT) $ 4,620 Taxes (25%) 1,155 Net income $ 3,465 Other data: Shares outstanding (millions) 500.00 Common dividends (millions of $) $1,212.75 Int. rate on notes payable & L-T bonds 6% Federal plus state income tax rate 25% Year-end stock price $83.16 What is the firm's profit margin? Do not round your intermediate calculations. a. 5.22% b. 9.40% c. 5.78% d. 3.45% e. 3.21%
Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of 1.75. Its sales were $310,000 and its net income was $9,000. The firm finances using only debt and common equity, and its total assets equal total invested capital. The CFO believes that the company could have operated more efficiently, lowered its costs, and increased its net income by $11,000 without changing its sales, assets, or capital structure. Had it cut costs and increased its net income by this amount, how much would the ROE have changed? Do not round your intermediate calculations. a. 6.76 p.p. b. 6.21 p.p. c. 3.55 p.p. d. 4.72 p.p. e. 8.26 p.p. The balance sheet and income statement shown below are for Koski Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. Balance Sheet (Millions of $) 2021 Assets Cash and securities $ 5,400 Accounts receivable 15,000 Inventories 15,600 Total current assets $ 36,000 Net plant and equipment 24,000 Total assets $ 60,000 Liabilities and Equity Accounts payable $ 17,446 Accruals 11,154 Notes payable 7,000 Total current liabilities $ 35,600 Long-term bonds 10,000 Total liabilities $ 45,600 Common stock 2,880 Retained earnings 11,520 Total common equity $ 14,400 Total liabilities and equity $ 60,000 Income Statement (Millions of $) 2021 Net sales $ 108,000 Operating costs except depreciation 100,440 Depreciation 1,920 Earnings before interest and taxes (EBIT) $ 5,640 Less interest 1,020 Earnings before taxes (EBT) $ 4,620 Taxes (25%) 1,155 Net income $ 3,465 Other data: Shares outstanding (millions) 500.00 Common dividends (millions of $) $1,212.75 Int. rate on notes payable & L-T bonds 6% Federal plus state income tax rate 25% Year-end stock price $83.16 What is the firm's profit margin? Do not round your intermediate calculations. a. 5.22% b. 9.40% c. 5.78% d. 3.45% e. 3.21%
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of 1.75. Its sales were $310,000 and its net income was $9,000. The firm finances using only debt and common equity, and its total assets equal total invested capital. The CFO believes that the company could have operated more efficiently, lowered its costs, and increased its net income by $11,000 without changing its sales, assets, or capital structure. Had it cut costs and increased its net income by this amount, how much would the ROE have changed? Do not round your intermediate calculations.
|
|||
|
|||
|
|||
|
|||
|
The
Balance Sheet (Millions of $) | 2021 | |||
Assets | ||||
Cash and securities | $ | 5,400 | ||
15,000 | ||||
Inventories | 15,600 | |||
Total current assets | $ | 36,000 | ||
Net plant and equipment | 24,000 | |||
Total assets | $ | 60,000 | ||
Liabilities and Equity | ||||
Accounts payable | $ | 17,446 | ||
Accruals | 11,154 | |||
Notes payable | 7,000 | |||
Total current liabilities | $ | 35,600 | ||
Long-term bonds | 10,000 | |||
Total liabilities | $ | 45,600 | ||
Common stock | 2,880 | |||
11,520 | ||||
Total common equity | $ | 14,400 | ||
Total liabilities and equity | $ | 60,000 | ||
Income Statement (Millions of $) | 2021 | |||
Net sales | $ | 108,000 | ||
Operating costs except |
100,440 | |||
Depreciation | 1,920 | |||
Earnings before interest and taxes (EBIT) | $ | 5,640 | ||
Less interest | 1,020 | |||
Earnings before taxes (EBT) | $ | 4,620 | ||
Taxes (25%) | 1,155 | |||
Net income | $ | 3,465 | ||
Other data: | ||||
Shares outstanding (millions) | 500.00 | |||
Common dividends (millions of $) | $1,212.75 | |||
Int. rate on notes payable & L-T bonds | 6% | |||
Federal plus state income tax rate | 25% | |||
Year-end stock price | $83.16 |
What is the firm's profit margin? Do not round your intermediate calculations.
|
|||
|
|||
|
|||
|
|||
|
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education