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Using the DuPont method, evaluate the effects of the following relationships for the Butters Corporation. a. Butters Corporation has a profit margin of 3.5 percent and its return on assets (investment) is 12.75 percent. What is its assets turnover? b. If the Butters Corporation has a debt-to-total-assets ratio of 75.00 percent, what would the firm s return on equity be? c. What would happen to return on equity if the debt-to-total- assets ratio decreased to 70.00 percent?

Using the DuPont method, evaluate the effects of the following relationships for the Butters Corporation. a. Butters Corporation has a profit margin of 3.5 percent and its return on assets (investment) is 12.75 percent. What is its assets turnover? b. If the Butters Corporation has a debt-to-total-assets ratio of 75.00 percent, what would the firm s return on equity be? c. What would happen to return on equity if the debt-to-total- assets ratio decreased to 70.00 percent?

Corporate Fin Focused Approach
Corporate Fin Focused Approach
5th Edition
ISBN:9781285660516
Author:EHRHARDT
Publisher:EHRHARDT
Chapter3: Analysis Of Financial Statements
Section: Chapter Questions
Problem 8P
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Using the DuPont method, evaluate the effects of the following relationships for the Butters Corporation. a. Butters Corporation has a profit margin of 3.5 percent and its return on assets (investment) is 12.75 percent. What is its assets turnover? b. If the Butters Corporation has a debt-to-total-assets ratio of 75.00 percent, what would the firm s return on equity be? c. What would happen to return on equity if the debt-to-total- assets ratio decreased to 70.00 percent?
Transcribed Image Text:Using the DuPont method, evaluate the effects of the following relationships for the Butters Corporation. a. Butters Corporation has a profit margin of 3.5 percent and its return on assets (investment) is 12.75 percent. What is its assets turnover? b. If the Butters Corporation has a debt-to-total-assets ratio of 75.00 percent, what would the firm s return on equity be? c. What would happen to return on equity if the debt-to-total- assets ratio decreased to 70.00 percent?
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