Answer:
The correct answer is: Retaining a higher percentage of earnings will result in a lower growth rate.; Long-run earnings growth will decrease when firms retain earnings and reinvest them in the business.
Explanation:
In the first statement, a deliberate action is shown that consists of the capitalization of the entity, that is, the equity is accumulated in order to distribute it among the shareholders and leave a part to support the company. In the second statement, it means that the positive results of the company will not be seen in the long term due to management's dispositions to execute a policy to capitalize the entity and improve its cash flow by reinvesting the perceived resources.
Answer:
Residual Income = $6,000
Explanation:
Residual income is the excess income of a firm leftover the opportunity cost of capital or over the desired income.
Given,
The minimum rate of return 12%
Average operating assets = $300,000
Net operating income = $42,000
We know,
Residual Income = Net Operating Income - (Average operating assets x the minimum rate of return)
Residual Income = $42,000 - ($300,000 x 12%)
Residual Income = $42,000 - $36,000
Residual Income = $6,000
Answer:
Correct option is (D)
Explanation:
Given:
Purchase price of copyright = $50,000
Expected useful life = 5 years
Annual depreciation expense as per straight line method:
= Purchase price ÷ useful life
= 50,000 ÷ 5
= $10,000
Only useful life is considered and not legal life.
Carrying value of asset at the end of year = Book value of asset - annual depreciation
Carrying value of copyright at then end of first year = 50,000 - 10,000 = $40,000
Carrying value of copyright at then end of second year = 40,000 - 10,000 = $30,000
Answer:
11.97%
Explanation:
Common size statement value of inventory is where all accounts are expressed as a percentage of total assets.
Total assets = Net fixed assets + Current assets
= $544 + $300
= $844
Common size statement value of inventory = Inventory ÷ Total assets
= $101 ÷ $844
= 0.1197
= 11.97%
I’m confused about the question