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%

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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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%
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