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alekssr [168]
3 years ago
12

Klein Cosmetics has a profit margin of 5.0%, a total assets turnover ratio of 1.5 times, no debt and therefore an equity multipl

ier of 1.0, and an ROE of 7.5%. The CFO recommends that the firm borrow money, use the funds to buy back stock, and raise the equity multiplier to 2.0. The size of the firm (assets) would not change. She thinks that operations would not be affected, but interest on the new debt would lower the profit margin to 4.5%. This would probably be a good move, as it would increase the ROE from 7.5% to 13.5%.
A.True
B.False
Business
1 answer:
Vinil7 [7]3 years ago
4 0

Answer:

A.True

Explanation:

the net profit will drop for 0.05 to 0.045

but the as the equity multiplier increase to 2 this means equity finance 50% of the company thus, the return on equity will be of:

Assets turnover x profit margin = 0.0675

that is the return on assets.

but equity present half the assets thus, the multiplier is 2

return on assets  x equity multiplier = return on equity

0,0675 x 2  = .135 = 13.5%

This makes the statemnt true, the comapny will benefit from taking debt as will increase the return on the stockholders which is the goal for a good management.

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Select which government was granted each of the powers listed. Coining of money Fire and police protection Schools Army and Navy
Rashid [163]

Answer:

  1. Coining of money: FEDERAL GOVERNMENT
  2. Fire and police protection: STATE GOVERNMENT
  3. Schools: STATE GOVERNMENT
  4. Army and Navy: FEDERAL GOVERNMENT
  5. Treaties with other nations : FEDERAL GOVERNMENT
  6. Highways and roads: STATE GOVERNMENT
  7. Local courts: STATE GOVERNMENT

3 0
3 years ago
Foreign companies that are listed on the New York Stock Exchange (NYSE) and following their domestic GAAP must report their inco
Arlecino [84]
The generally accepted accounting principles of the United States
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3 years ago
You are trying to explain to your friends the importance of using real GDP to measure economic health over time, but some of the
Yuri [45]

Answer: $15,909.09

Explanation:

Nominal GDP is the value of goods and services that is calculated on the basis of current year prices whereas Real GDP is the value of goods and services that is determined on the basis of Base year prices. If we are using the identical price for both the years for calculating GDP then we can see the increment in the current year GDP from the last year. This means that the quantity of goods produced in the current year is larger than the last year. That's why it is important to use Real GDP rather than Nominal GDP.

Given that,

Nominal GDP (millions of dollars) = $14000

Price level (GDP deflator) = 88

\text{GDP dflator}=\frac{Nominal\ GDP}{Real\ GDP}\times100

\text{88}=\frac{14,000}{Real\ GDP}\times100

Real GDP = 159.09 × 100

                = $15,909.09

Hence, Real GDP = $15,909.09.

Therefore, Real GDP is greater than Nominal GDP hence we can say that the amount of good produced is worth more than $14,000.

3 0
3 years ago
Employees are a vital part of the success of a service based business, particularly because they are normally present and intera
g100num [7]

Answer:

true

Explanation:

employees play a significant role in the success of a service based business because they build an atmosphere of trust , confidence and loyalty among the customer by interacting with the customer while the service is being provided.

8 0
3 years ago
Suppose you are the manager of a local water company, and you are instructed to get consumers to reduce their water consumption
Veronika [31]

The price of the water needs to be raised by 40% when the consumption of water reduces by 10% and the price elasticity of demand results to 25%.

<h3>What is meant by the price of elasticity of demand?</h3>

The price elasticity of demand is determined as the proportionate variation in quantity with respect to variation in the price of a good.

Given values:

Change in water consumption (fall): 10%

Price elasticity of demand: 25%

Computation of percentage change in the price of water:

\rm\ Change \rm\ in \rm\ price \rm\ of \rm\ water=\frac{\rm\ Change \rm\ in \rm\ water \rm\ consumption}{\rm\ Price \rm\ elasticity \rm\ of \rm\ demand} \\\rm\ Change \rm\ in \rm\ price \rm\ of \rm\ water=\frac{10\%}{25\%} \\\rm\ Change \rm\ in \rm\ price \rm\ of \rm\ water=40\%

Therefore, there is an increase in water price by 40%.

Learn more about the price elasticity of demand here:

brainly.com/question/15010897

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6 0
2 years ago
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