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3 years ago

True or False. An increase in financial leverage generally results in a higher return on equity (ROE).

Business

1 answer:

xz_007 [3.2K]3 years ago

5 0

Answer:

False

Explanation:

An increase in financial leverage only results in a higher return on equity when the return on assets is higher than the cost of the leverage (i.e. the interest rate on debt).

Given the relationship below among, total assets, equity and debt (leverage)

total assets = equity + debt

and equity = total asset - debt,

We can deduce the equation below

Return on Equity = Return on Asset (ROA) - Return to Debt (ROD) (approximately)

Accordingly, if ROA is greater than ROD, an increase in financial leverage will result in a higher ROE. If the cost of debt (ROD) is however higher than ROA, an increase in financial leverage will result in a lower ROE.

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Unlike households, governments are often able to sustain large debts. For example, in 2013, the U.S. government's total debt rea

nirvana33 [79]

Answer:

the dollar cost of the annual interest on the government's total debt assuming the interest rate and debt is $356 billion

Explanation:

Dollar cost of annual interest on total debt = Total debt for the year x Average interest rate

= $17.3 trillion x 2%

= $17,300 billion x 2%

= $346 billion

This value is closest to option (2).

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4 years ago

Sasha has just gotten a new job in a nearby city. After comparison shopping, she found that renting a nice two-bedroom apartment

kramer

Answer:

The advantage over buying the house over renting the apartment is that, you would own the house instead of just renting it. If you own the house, and the mortgage covers everything including repairs if you buy the house while if you need a repair in a rented apartment it would probably cost a fortune. Living in an apartment means that if the owner decides they want to rent the house or sell the house, that you will have to move (or pay for a mortgage which you might as well buy the house that's bigger than buy the apartment.)

Hope this helps! :) Plz mark as brainliest!

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3 years ago

This isn't a question!

RSB [31]

Answer:

Thank you for the brainly please make brainliest I answer lots of questions when i have time

Explanation:

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3 years ago

You were recently promoted to a management position at a large department store. One of your new responsibilities is recruiting

Wittaler [7]

Answer:

General mental ability

Explanation:

The job role in this scenario is for Assistant manager position requires someone that can learn quickly and rapidly acquire, process, and synthesize information.

This requires someone with general mental ability.

General mental ability is the skill one posses to easily understand verbal information, process numbers and information, and ability to see logical relationships between different concepts.

Other intelligence types include Spatial-visual intelligence, Logical-mathematical intelligence, Bodily-kinesthetic intelligence

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4 years ago

On May 1 of the current year, La Presa Company sells some equipment for $25,000. The original cost was $50,000, the estimated sa

snow_tiger [21]

Answer:

The loss on sale is $ 4,000.

Explanation:

Loss or gain on an Asset can be determined by this formula:

Loss or gain = Disposal/Consideration price - Book Value of Asset.

<u>Determining book value.</u>

Book Value of Asset = Acquisition cost - Accumulated depreciation.

Acquisition cost is 50,000.

Annual depreciation expense = Depreciation base/Number of years.

(50,000 - 5,000) /5= 9,000

Accumulated depreciation is 18,000 + (9000 × 4/12) = 21,000.

Therefore book value of asset = 50,000 - 21,000.

Book Value of Asset = 29,000.

Disposal/Consideration price = 25,000

<u>Determining loss or gain on asset disposal.</u>

Loss or gain = Disposal/Consideration price - Book Value of Asset.

Loss or gain = 29,000 - 32,000.

Loss on sale was = 4,000.

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3 years ago