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navik [9.2K]
3 years ago
6

If a firm utilizes debt financing, a 10% decline in earnings before interest and taxes (EBIT) will result in a decline in earnin

gs per share that is larger than 10%, and the higher the debt ratio, the larger this difference will be.
True or False?
Business
1 answer:
zysi [14]3 years ago
6 0

Answer:

True

Explanation:

It is easier to explain following an example:

EBIT 100

debt interests 25

shares outstanding 500

                            No change scenario      -10% EBIT          +10% EBIT

EBIT                              100                              90                       110

<u>interests                       (25)                             (25)                      (25)     </u>

net income                    75                               65                        85

earnings per share      0.15                            0.13                      0.17

change                           -                              -13.3%                  +13.3%

A 10% EBIT decrease will result in a 13.3% decrease in earnings per share, while a 10% EBIT increase will result in a 13.3% increase in earnings per share.

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3 0
3 years ago
Novak Corp. has 6000 shares of 5%, $100 par value, cumulative preferred stock and 12000 shares of $1 par value common stock outs
Annette [7]

Answer:

See below

Explanation:

Given the above data,

Preferred shares = 6,000 shares × $100 = $600,000

Dividend on preference shares = $600,000 × 5% = $30,000 per year

Dividend declared in 2019

= $55,800

Preferred dividend in 2019 = $30,000 × 2 = $60,000

Dividend declared in 2020 =$55,800

Preferred dividend declared in 2020 = $30,000 + $4,200 = $34,200

Dividend paid to common stock holders = $55,800 - $34,200 = $21,600

5 0
2 years ago
On January 1, Mumford purchased 10% of Heller's common stock. On September 1, it purchased another 30% of Heller's common stock.
professor190 [17]

10% of Heller's income for January 1 to August 31, plus 40% of Heller's income for the remainder of the year.

Explanation:

In spite of a retrospective strategy, Mumford puts the 10 per cent owned by the creditor firm together with the 30% purchased on Sep 1 which accounts for 40 per cent of the sales of Heller.

Retrospective, the committee focuses on the team members ' collaboration and looks for ways to enhance the process, based on the lessons learned in the recent work .

It is time to reflect on past events and experiences – outside the daily routine.

Retrospective thinking occurs whenever one remembers something from the past, but one can also think retrospectively about hypothetical future events, by imagining that the event has already transpired and then working backward in the mind from the future toward the present.

5 0
3 years ago
You are a U.S.-based treasurer with $1,000,000 to invest. The dollar-euro exchange rate is quoted as $1.50 = €1.00 and the dolla
Verdich [7]

Answer:

The correct answer is (B) Buy euro at $1.50/€, buy £ at €1.25/£, sell £ at $2/£

Explanation:

The dollar- euro exchange rate is quoted as $1.50 = €1.00

the dollar-pound exchange rate is quoted at $2.00 = £1.00

To calculate the actual cross rate we use; S(euro divided by pounds) =  S(dollar/pounds) ÷ S(dollar/euro).

Using symbols to denote this, we have S(€/£) = S($/£) / S($/€)

S(€/£) = S(2/1) ÷ S(1.50/1)

= (2 / 1.5)

= €1.33.

Consequently, from this result we now know that the euro is undervalued with respect to pounds under the cross rate being offered by the bank. This implies that you should first buy the euro, convert to pounds, and eventually convert back to dollars, this would enable you make money as an investor.

3 0
3 years ago
Read 2 more answers
In general, education is correlated to income
liq [111]

Answer:

positively.

Explanation:

The <u><em>correlation </em></u>between education and income is positive a more educated person will always have a better income than one that is not. But along the statistical distribution of this<u><em> correlation</em></u> there are people that <u><em>deviate </em></u>for the curve <u><em>(standar deviation)</em></u>  and even though they are educated they do not earn as much money to others that have the same level of education.

3 0
3 years ago
Read 2 more answers
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