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BARSIC [14]
3 years ago
6

This year Erie achieved an ROE of 23.9%. Suppose the Board of Directors of Erie mandates that management take measures to increa

se financial Leverage (Assets/Equity) next year from 2.6 to 3.2. Assuming Sales, Profits, and Assets remain the same next year, what effect would you expect this new Leverage policy will have on Erie ROE? (Hint- use the DuPont formula)"a. Erie s ROE will decrease.b. Erie s ROE will increase.c. Erie s ROE will remain the same.d. Erie s equity will decrease and the stock price will increase
Business
1 answer:
allochka39001 [22]3 years ago
8 0

Answer:

c. Erie s ROE will remain the same

Explanation:

As the return on asset is calcualte using the asset figure it will not change with a financial leverage measurement.

As the financial leverage acts in the composition of other side of the accounting (assets = liabilitis + equity) it will change the return on equity, the debt ratio and other metric related to this side but, not the return on assets.

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Federal inspectors find that several shipments of hamburger supplied to grocery chains is contaminated with potentially harmful
brilliants [131]

Answer:

The Food and Drug Administration issues a recall for the meat, and the seller notifies its customers.

Explanation:

When there is a serious or potentially serious risk to consumers, the FDA works with sellers and distributors to recall products (remove them from store shelves) and notify customers through press releases and other communications.

7 0
3 years ago
A 65-year-old retiree wishes to convert the cash value of his insurance policy into an annuity. He can select an annuity that wi
insens350 [35]

Answer:

The annual difference between Option 1 (15 years) and Option 2 (20 years) is $7,211.19 in favor of the first one.

Explanation:

Giving the following information:

Option 1:

Number of years= 15

FV= 450,000

i= 0.0525

Option 2:

Number of years= 20

FV= 450,000

i= 0.0525

To calculate the annual cash flow, we will use the following formula on each option:

A= (FV*i)/{[(1+i)^n]-1}

A= annual cash flow

<u>Option 1:</u>

A= (450,000*0.0525) / [(1.0525^15) - 1]

A= $20,464.72

<u>Option 2:</u>

A= (450,000*0.0525) / [(1.0525^20) - 1]

A= $13,253.53

The annual difference between Option 1 (15 years) and Option 2 (20 years) is $7,211.19 in favor of the first one.

5 0
2 years ago
The vice president of logistics for a salty-snack A reading service for the visually impaired requires each reader applicant to
katrin2010 [14]

Answer:

logistics integration with cost-effective technique.

Explanation:

Combining these two techniques the company might better attend the consumers and also save costs for the Company.

3 0
3 years ago
Antoine transfers property with a tax basis of $535 and a fair market value of $652 to a corporation in exchange for stock with
Dimas [21]

Answer: $438

Explanation:

Antoine's tax basis in the stock received in the exchange will be gotten as the adjusted basis of asset exchanged which will then be decreased by the liability assumed on the property that's transfered. This will be:

= $535 - $97

= $438

Therefore, Antoine's tax basis in the stock received in the exchange is $438.

8 0
2 years ago
Following are the accounts and balances from the adjusted trial balance of Stark Company. Notes payable $ 11,000 Accumulated dep
DENIUS [597]

Answer:

                    STARK COMPANY

                  INCOME STATEMENT

      FOR THE YEAR ENDED DECEMBER 31

PARTICULARS                          AMOUNT$

Service Revenue                           20,000

<u>Less-Expenses</u>

Supplies expense           200

Interest expense             500

Insurance expense         1800

Utilities expense             1300

Depreciation expense    2000

Wages expense              7500

Total expenses                              <u>13,300</u>

Net profit                                       <u>$6,700</u>

                              STARK COMPANY

                  STATEMENT OF RETAINED EARNINGS

FOR THE YEAR ENDED DECEMBER 31                       Amount$

Retained earnings December 31 prior year end            14,800

Add- Net income                                                               6,700

Less- Dividends                                                                 3,000

Retained earnings, December 31 Current year end   $18,500

8 0
3 years ago
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