Question 1 Multiple Choice Worth 10 points)

7. DuPont Identity. X Corp. has net income of $20 million, Sales of $100 million, asset turnover of .6, and debt-equity ratio of

goldfiish [28.3K]

Answer:

Explanation:

Net Income = 20m

Sales = 100m

Debt-equity ration = 40%

Asset turnover = 0.60

A)

Profit Margin = Net Income / Sales = $20 million / $100 million = 20%

Equity Multiplier = 1 + Debt-Equity Ratio = 1 + 0.40 = 1.40

Return on Equity = Profit Margin * Asset Turnover * Equity Multiplier = 20% * 0.60 * 1.40 = 16.80%

B)

Debt-equity ratio = 60%

Equity Multiplier = 1 + Debt-Equity Ratio = 1 + 0.60 = 1.60

Return on Equity = Profit Margin * Asset Turnover * Equity Multiplier = 20% * 0.60 * 1.60 = 19.20%

As calculations provide, if debt-equity ratio increases to 60%, Return on equity will increase by 2.40% (19.20% - 16.80%)

7 0

3 years ago

Intellectual Property can be protected by

mash [69]

The answer you are looking for is copyright

5 0

3 years ago

Thyme, Inc. owns 16,000 of Sage Co.'s 20,000 outstanding common shares. The carrying value of Sage's equity is $500,000. Sage su

DedPeter [7]

Answer:

The total non controlling interest after the additional shares are issued is equal to $252,000.

Explanation:

Before the issue Sage co's had 20,000 shares with total equity value of $500,000. After the issue of 5000 shares worth $200,000, the total number of shares and equity would be -

Total number of shares = 25,000 ( 20,0000 + 5000 )

Total equity value = $700,000

Now Thyme inc owns 16,000 number of shares , which means that minority holds 9000 number of shares . Now the price per share would be =

TOTAL EQUITY / NUMBER OF SHARES

$700,000 / 25,000

= $28

NON CONTROLLING INTEREST = Minority shares x Price per shares

= 9000 x $28

= $252,000

8 0

3 years ago

Hilton Brews is a company producing instant mixes for all kinds of beverages. It notices that the market for tea has risen due t

Zina [86]

Answer:

Hilton Brews

The organizational growth strategy used by Hilton Brews is:

B. Diversification.

Explanation:

Diversification strategy is the corporate strategy that Hilton Brews has adopted to take advantage of the increased health benefits of teas by introducing a new line of organically grown and processed teas. Diversification strategy is different from other corporate growth strategies which Hilton Brews could have adopted, including market expansion, market penetration, and product development.

7 0

3 years ago

Mark or Make is a bourbon distillery. Sales have been steady for the past three years, and operating costs have remained unchang

schepotkina [342]

Answer:

a. No allocation

2019 2020 2021

Gross Profit on Sales 350,000 349,000 351,000

Less: Operating Expense 210,000 210,000 210,000

Gross Revenue 140,000 139,000 141,000

Rent (Prepaid) 0 0 0

Revenue after Rent paid 140,000 139,000 141,000

Less: Corporate Taxes at 30% 42,000 41,700 42,300

Net Income $98,000 $97,300 $98,700

Considerations for No Allocation

- Taxes are to be deducted from Gross Profit.

- Rent not to be deducted from Gross Profit.

b. Comprehensive Allocation

2019 2020 2021

Gross Profit on Sales 350,000 349,000 351,000

Less: Operating Expense 210,000 210,000 210,000

Gross Revenue 140,000 139,000 141,000

Rent (Prepaid) 60,000 60,000 60,000

Revenue after Rent paid 80,000 79,000 81,000

Less: Corporate Taxes at 30% 24,000 23,700 24,300

Net Income 56,000 55,300 56,700

Considerations for Comprehensive Allocation

- Taxes are to be deducted from Gross Profit.

- Rent is to be deducted from Gross Profit.

c. No allocation distorts Mark or Make’s Net Income for all three years. This is because if Rent is not allocated taxes will be calculated on Gross Revenue. That is to say, Rent is a Non-Operating Expense and hence is to be deducted from Revenue to Calculate the Taxes. When Revenue is reduced, obviously, the taxes will be reduced. Hence, less income is seen in Comprehensive Income Statement and more Revenue is seen in Simple - Non Comprehensive Statement.

4 0

3 years ago