Answer:
The statement the the Return on Equity will decline is False.
Explanation:
The following terms can be defined as follows;
1. Debt
Debt can be defined as money that is owed. It is a financial obligation that is due. In a firm that is in business, debt can be defined as money that is borrowed from a financial institution like a bank. Firms usually borrow loans with a promise to pay back in the future, usually with interest involved. Debt if invested carefully can help a company grow, however, if misused it can lead to negative consequences like default. When debt is overused, the liabilities outweigh assets.
2. Interest cost
Interest cost is the additional cumulative amount that a borrower pays to the lender to cover the lenders risk and operational costs. The interest cost is a function of the debt. An increased debt obligation usually increases the interest costs.
3. Profit margin
The profit margin can be defined as the amount of revenue less the total expenditure. Expenditure includes; operational costs of running the business and interest costs. It therefor means that increasing interest costs leads to a reduction in the profit margin.
4. ROE
Return on Equity is a measure of financial performance, calculated by dividing the net income by the shareholder's equity. The net income is total expenditure subtracted from the total revenue, and the shareholder equity is calculated by subtracting total debt from the assets. Therefor an increase in debt reduces the total shareholder's equity which in turn increase the return on equity. The above statement is therefor false.
Answer:
no
Explanation:
profit businesses have the only motive to gain profit whereas non profit businesses main motive is to provide the supply of goods and services to the general public.....without a fee
Answer:
1. a. Only major materials and components.
Only the major materials and components are include as direct materials because these are the materials that directly needed for production.
b. Only hourly production workers (aka assembly workers).
The direct labor has to be those people who are directly involved in production which in this case is the assembly workers. Managers and Supervisors are not integral so are not direct labor.
c. Both big items that cannot be traced (e.g., factory rent) and small items that are not worth tracing (e.g., glue, grease).
All other items involved in production should be included as manufacturing overheads including big items and small items that cannot be traced.
2.
Rent for the factory building ⇒ <u>Manufacturing Overhead (OH).</u>
Cost of engines used in production ⇒ <u>Direct materials (DM).</u>
Depreciation on production equipment ⇒ <u>Manufacturing Overhead (OH). </u>
Cost of lubricant used in production. ⇒<u> Manufacturing Overhead (OH). </u>
Production supervisor's salary. ⇒ <u>Manufacturing Overhead (OH). </u>
Assembly workers' wages. ⇒ <u>Direct Labor.</u>
This problem needs a Balance Sheet. Ratios are computed based on Balance Sheet, Income Statement, and Statement of Cash flows.
I'll just give out the formula needed to solve for each question.
Current ratio = Current Assets / Current Liabilities
* These figures are found in the Balance Sheet.
Quick ratio = (Cash + Marketable Securities + Accounts Receivable) ÷ <span> Current Liabilities
* These figures are found in the Balance Sheet
</span><span>Inventory turnover ratio = Cost of goods sold / Average Inventory
Inventory turnover ratio = 1,400,000 / Average Inventory
Receivables turnover = Net Credit Sales / Average Accounts Receivable
Assuming Sales is all on account,
Receivables turnover = 2,000,000 / Average Accounts Receivable
Total asset turnover = Net Sales / Total Assets
Assuming Sales is all net of sales returns and discounts,
Total asset turnover = 2,000,000 / Total Assets
Times interest earned (TIE) = Income before Interest and Taxes / Interest Expense
Times interest earned = 370,000 / 50,000 = 7.4 times
Total debt ratio = Total Liabilities / Total Assets
Return on equity (ROE) = Net Income / Shareholders Equity
Return on equity = 240,000 / Shareholders' Equity
Return on assets (ROA) = Net Income / Total Assets
Return on assets = 240,000 / Total Assets
Market-to-book ratio = Share Price / Net book value per share
Market-to-book ratio = 41.40 / Net book value per share
Price-to-earnings (P/E) ratio = Market Value per share / Earnings per share
</span><span>Price-to-earnings ration = 41.40 / 2.40 = 17.25
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