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poizon [28]
3 years ago
13

A firm has a net profit/pretax profit ratio of .6, a leverage ratio of 1.5, a pretax profit/EBIT of .7, an asset turnover ratio

of 4, a current ratio of 2, and a return-on-sales ratio of 6%. Its ROE is _________.
A. 15.12%
B. 20.16%
C. 30.24%
D. 7.56%
Business
1 answer:
Alenkinab [10]3 years ago
6 0

Answer:

The answer is A.15.12%.

Explanation:

Please find the below for explanation and calculations:

We have EBIT = Pretax profit /0.7 = Net profit / (0.6 x 0.7) = 0.42 x Net Profit

=> Net profit / Sales = Profit margin =  0.42 x EBIT/ Sales = 0.42 x Return-on-sales = 2.52%;

Leverage ratio = Asset/ Equity = 1.5;

Sales / Asset = asset turn over ratio = 4;

Apply the Dupont model we have:

Return on Equity = Leverage ratio x Profit Margin x Leverage ratio = 2.52% x 1.5 x 4 = 15.12%.

Thus, the answer is A. 15.12%.

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On April 1, 9,000 shares of $7 par common stock were issued at $26, and on April 7, 5,000 shares of $70 par preferred stock were
Mariana [72]

Answer:

Apr 1

DR Cash $234,000  

CR Common stock   $63,000

CR   Paid in capital in excess of par - Common Stock  $171,000

<em>(To record issuance of common stock)</em>

 

Apr 7

DR Cash $540,000  

CR Preferred stock   $350,000

CR Paid in capital in excess of par - Preferred Stock  $190,000

<em>(To record issuance of preferred stock)</em>

 

Explanation:

April 1

Cash

9,000 * 26 = $234,000

Common stock

9,000*7 = $63,000

April 7

Cash

5,000*108 = $540,000

Preferred stock

5,000*70 = $350,000

7 0
3 years ago
The financial statements of Trenton Office Supply include the following​ items: 2019 2018 Cash $ 46 comma 500 $ 43 comma 000 Sho
Juli2301 [7.4K]

Answer:

1.21

Explanation:

Current Ratio = Current Asset / Current Liabilities

= (Cash + Shortminusterm Investments + Net accounts receivable + Inventory) / Current Liabilities

= ( 46500 + 34000 + 102000 + 129000) / 257000

= 1.21

7 0
2 years ago
Read 2 more answers
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mr Goodwill [35]
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Victoria Enterprises expects earnings before interest and taxes ​(EBIT​) next year of $ 2.5 million. Its depreciation and capita
Law Incorporation [45]

Answer:

Value of Victoria Enterprises=  $21,498,285.71  

Explanation:

<em>Free cash flow represents the amount that is left to all the providers of capital after the payment of all all operating expenses, working capital and investment in fixed asset expenditures. </em>

It is computed as cash flow made from operation less capital expenditures

For Victoria Enterprises

The Free cash flow

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= 2.5 × (1-0.4) + 0.295 - 0.295 - 0.053

= 2,500,000 × (1-0.4) + 295,000 -295,000- 53,000

FCFF= $1,447,000

Value of a firm = FCFF (1+g)/(WACC-g)

g- growth rate - 4%, WACC- 11%, FCFF-1,447,000

Value of Victoria = 1,447,000 × (1+0.04)/(0.11- 0.04) =  21,498,285.71  

Value of Victoria=  $21,498,285.71  

3 0
3 years ago
What is one course of action available in every problem solving process
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