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Ventura Inc. had the following financial information last year: Assets: $250,000 Sales: $400,000 Net Income: $25,000 Debt-to-Total-Assets Ratio: 40% The CFO proposes a new operational strategy that would increase net income to $42,000, while assets, sales, and the debt ratio remain unchanged. By how much would this improvement increase the return on equity (ROE)? a. 12.24% b. 11.33% c. 10.50% d. 9.80%

Ventura Inc. had the following financial information last year: Assets: $250,000 Sales: $400,000 Net Income: $25,000 Debt-to-Total-Assets Ratio: 40% The CFO proposes a new operational strategy that would increase net income to $42,000, while assets, sales, and the debt ratio remain unchanged. By how much would this improvement increase the return on equity (ROE)? a. 12.24% b. 11.33% c. 10.50% d. 9.80%

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter13: Capital Structure Concepts
Section: Chapter Questions
Problem 6P
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Ventura Inc. had the following financial information last year: Assets: $250,000 Sales: $400,000 Net Income: $25,000 Debt-to-Total-Assets Ratio: 40% The CFO proposes a new operational strategy that would increase net income to $42,000, while assets, sales, and the debt ratio remain unchanged. By how much would this improvement increase the return on equity (ROE)? a. 12.24% b. 11.33% c. 10.50% d. 9.80%
Transcribed Image Text:Ventura Inc. had the following financial information last year: Assets: $250,000 Sales: $400,000 Net Income: $25,000 Debt-to-Total-Assets Ratio: 40% The CFO proposes a new operational strategy that would increase net income to $42,000, while assets, sales, and the debt ratio remain unchanged. By how much would this improvement increase the return on equity (ROE)? a. 12.24% b. 11.33% c. 10.50% d. 9.80%
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