1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
kakasveta [241]
3 years ago
9

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

40%. a. What is its return on equity? b. If X increases its debt-equity ratio to 60%, what happens to its return on equity?
Business
1 answer:
goldfiish [28.3K]3 years ago
7 0

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%)

You might be interested in
During the first two years, Supplies, Inc. drove the company truck 15,000 and 22,000 miles, respectively, to deliver merchandise
Mnenie [13.5K]

Answer:

option (A) $11,000

Explanation:

Given;

Miles drove in first year = 15,000

Miles drove in second year = 22,000

Cost of the truck = $175,000

Residual value = $25,000

Estimated life = 10 years or 300,000 miles

Now,

using the activity based method

Rate of depreciation per mile driven = \frac{\textup{Cost of truck - Residual value}}{\textup{Estimated life}}

or

Rate of depreciation per mile driven = \frac{\textup{175,000 - 25,000}}{\textup{300,000}}

or

= $0.5 per mile

also,

Number of miles driven in second year = 22,000 miles

Hence,

Depreciation for the second year

= Depreciation rate × Number of miles driven in second year

= 0.5 × 22,000

= $11,000

Hence,

The correct answer is option (A) $11,000

6 0
3 years ago
Identify at least four different types of financial statement users and discuss why each would use the financial statements.
GarryVolchara [31]

Answer:

Government authorities :

They will use the financing statement to ensure the fairness of the business and to receive proper amount of tax.

Investors :

Current or potential investors would check financial statements to ensure they will suitable returns after investment.

Creditors :

They will check financial statements to make sure they get their due money back.

Employees :

The employees will ask for bonus if the company performance in statements is good,

8 0
2 years ago
Amy has opened a new startup company in web design. Within the first month of business, the startup agrees to maintain an accoun
lara31 [8.8K]

Answer:

<em>a) Trade can make everyone better off </em>

Explanation:

In business, it is common to see trades. If the startup agrees to maintain an accounting firm's website in EXCHANGE for the tax returns, that is called trading since you are giving one thing for another.

Hope this helps! :)

3 0
3 years ago
E-businesses use the physical rather than the virtual value chain
Olenka [21]

Answer:

trueee

Explanation:

5 0
3 years ago
Individuals who are given hard or challenging goals perform better than those given easy goals - true or false
muminat
False.....................
6 0
3 years ago
Read 2 more answers
Other questions:
  • The following information for the past year for the Blaine Corporation has been provided:Fixed costs:Manufacturing$ 125, 000$125
    13·1 answer
  • "cost assignment refers to the general case of assigning costs to cost pools or cost objects. when there is a direct and traceab
    6·1 answer
  • Explain partner by estoppel ...and please follow me ​???
    6·1 answer
  • Mary and Kay, Inc., a distributor of cosmetics throughout Florida, is in the process of assembling a cash budget for the first q
    12·1 answer
  • Which of the following arguments are inductive, and which are deductive? Just answer "inductive" or "deductive".
    5·1 answer
  • A program in which students learn a specific skill for a particular job is called a?
    10·1 answer
  • What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?
    15·1 answer
  • Rogers has a nail that is 12 centimeter long. He measured and records the length of the nail as 15 centimeters. What is the perc
    10·1 answer
  • Hello everyone today is the 28 and I hope you are getting some with your school and approving I wanted to reach out to you that
    10·2 answers
  • Which career testing tool is one of the few assessments with right and wrong answers?.
    5·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!