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o-na [289]
3 years ago
15

Err Company has a major lawsuit against them for unsafe products. It recognizes a huge liability in 2004 of $300 million. The ef

fect of this liability is to decrease stockholders' equity by 50%. In 2005, the effect of recognizing this liability, all else equal, is:A. Return on net operating assets will increase dramatically
B. Return on net operating assets will decrease dramatically
C. Return on equity will increase dramatically
D. Return on equity will decrease dramatically
Business
1 answer:
Arturiano [62]3 years ago
5 0

Answer:

C) Return on equity will increase dramatically

Explanation:

Return on equity (ROE) is a profitability ratio and it is calculated using the following formula:

ROE = net income/ shareholders' equity

If shareholders' equity is reduced by 50%, and the net income remains stable, then ROE should double.

For example, net profit = $100, shareholders' equity = $1,000

ROE = $100 / $1,000 = 0.10

If shareholders' equity is reduced by 50%, then the new ROE will be:

ROE = $100 / $500 = 0.20

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Two of the major disadvantages of the functional organizational approach are that projects may lack focus and it can take longer to complete projects.

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8 0
1 year ago
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Answer:

B) 50%

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= ($150 - $100) / $100 = $50 / $100 = 0.5 or 50%

To be able to determine the annual rate of return we would need to know when did Mathew purchase the shares.

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3 years ago
In the enumeration method the project schedule is calculated many times (perhaps 1,000 or more), and each time, the estimate for
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3 years ago
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