Which of the following statements is true of financial leverage

In a new margin account, a customer buys 1,000 shares of ABC stock at $40 per share. The stock rises to $50 during the next week

Helen [10]

Answer:

C) $5,000

Explanation:

Since the price of the stocks first rose to $50, the account's equity was $50,000.

The SMA balance was = ($50,000 x 1/2) - $20,000 = $,5000

The SMA balance acts like a stabilizer and cannot be taken away even if the price of the stocks fall slightly. The price of stocks must fall 25% in order for the SMA to be withdrawn.

The investor's equity decreased = equity - margin requirement = $39,000 - $20,000 = $19,000, but the amount that the investor can borrow (SMA balance) will remain the same at $5,000.

4 0

3 years ago

The trading principle formulated by adam smith maintained that:

erma4kov [3.2K]

The correct answer is D. Absolute cost differences regulate the immediate basis for trade
Absolute gain is the ability of a country, separate, company or region to make a good or service at a lower cost per unit than the cost at which any other individual produces that same good or service.

6 0

3 years ago

LeCompte Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $620

Gnom [1K]

Answer:

LeCompte Corp.

The profit margin that LeCompte Corp. would need in order to achieve the 15% ROE, holding everything else constant is:

A) 7.57%.

Explanation:

a) Data and Calculations:

Assets = $312,900

Common Equity = Assets = $312,900

Sales for the last year = $620,000

Net income after taxes = $24,655

Expected return on equity (ROE) = 15%

ROE (in amount) = $312,900 * 15% = $46,935

Profit margin = Returns on Equity/ Sales * 100

= $46,935/$620,000 * 100

= 7.57%

b) The expected returns on equity in dollars is equal to the net income. Therefore, we can use the ROE to calculate the profit margin. The profit margin expresses the relationship between sales and profit. It shows the profit made from each dollar sales.

4 0

3 years ago

Westside Plumbing and Heating Company is offered a contract for$100,000 to provide plumbing for a new building. The labor and eq

Reika [66]

Answer:

Westside Plumbing and Heating Company

Westside should accept the contract.

By accepting the contract at the price of $100,000, Westside incurs a total cost of $97,500 and makes a little profit of $2,500 ($100,000 - $97,500). The contract enables Westside to utilize the materials that it has in inventory instead of allowing it to deteriorate further in value.

Explanation:

a) Data and Calculations:

Contract price = $100,000

Labor and equipment costs = $60,000

Original cost of materials = $50,000

Materials market price = $37,500

Total costs to be incurred = $97,500 ($60,000 + $37,500)

Profit to be earned = $2,500 ($100,000 - $97,500)

4 0

3 years ago

During the 'Value Articulation' cycle, you are asked to identify whether the solution can be productized for leverage in

aleksklad [387]

To leverage the productization of solutions identified during the "Value Articulation" cycle, you need to ensure that the solutions gained from the session develop into marketable products.

In all value articulation, the most important factors to consider are as follows:

1. Will the product meet the challenges or desires of potential customers?

2. What are the changes the product will create for the customer?

3. What is the value-added for my organization?

Thus, you must ensure that as the solutions develop into marketable products, they must generate sufficient revenue growth and profitability for the organization.

Learn more about articulating value here: brainly.com/question/24309787

6 0

3 years ago

Read 2 more answers