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kotykmax [81]
3 years ago
9

Pacific Packaging's ROE last year was only 3%, but its management has developed a new operating plan that calls for a debt-to-ca

pital ratio of 45%, which will result in annual interest charges of $546,000. The firm has no plans to use preferred stock and total assets equal total invested capital. Management projects an EBIT of $1,344,000 on sales of $14,000,000, and it expects to have a total assets turnover ratio of 3.2. Under these conditions, the tax rate will be 25%. If the changes are made, what will be the company's return on equity?
Business
1 answer:
777dan777 [17]3 years ago
6 0

Answer:

Explanation:

Total asset turnover = Sales/total assets

3.2= 14000000/Total assets

Total assets = 4375000

E/A = 1-D/A = 1-0.45 = 0.55

Equity = E/A*assets = 0.55*4375000=2406250

Net income = (EBIT-interest)*(1-tax rate)

=(1344000-546000)*(1-0.25)=598500

ROE = Net income/total equity

ROE% = 598500/2406250=0.248

ROE% = 24.8

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2 years ago
Presented below are four statements which you are to identify as true or false.
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Answer:

1. True.

2. False.

3. True.

4. False.

Explanation:

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For external reporting purposes, US Generally Accepted Accounting Principles (GAAP) allows companies to use only the traditional format of the income statement.

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Also, the financial accounting standards board (FASB) is a private, non-profit organization saddled with the responsibility of establishing and maintaining standard financial accounting and reporting for general guidance of individuals such as investors, issuers and auditors.

<em>Additionally, Securities and Exchange Commission (SEC) reviews registration statements of bond issuers, investment advisers etc, to ensure they comply with current laws and regulations. </em>

1. <u>True</u>: GAAP is the term used to indicate the whole body of FASB authoritative literature.

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3. <u>True</u>: The primary governmental body that has influence over the FASB is the SEC.

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3 years ago
You have been running a successful art and framing shop for three years. You have decided to allow others to use your business n
jeka94
<h3><u>Answer -</u></h3>

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<h3><u>Explanation -</u></h3>

A franchise agreement allows the business owner to use the licensor's brand and method of doing business. The franchisor is the original or existing business owner who allows the other one to use his/her business name materials and methods in operating their own business.

A certain amount of fees is to be paid by the franchisee that may be called in the layman’s language as the licensee, who is supposed to pay the fee to the licensor (franchisor) are exchanged for the rights to use the franchisor's name is for a specific number of years.

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