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elena-14-01-66 [18.8K]
3 years ago
11

Last year Rennie Industries had sales of $395,000, assets of $175,000 (which equals total invested capital), a profit margin of

5.3%, and an equity multiplier of 1.2. The CFO believes that the company could reduce its assets by $51,000 without affecting either sales or costs. The firm finances using only debt and common equity. Had it reduced its assets by this amount, and had the debt/total invested capital ratio, sales, and costs remained constant, how much would the ROE have changed? Do not round your intermediate calculations.
Business
1 answer:
maxonik [38]3 years ago
7 0

Answer: 5.9%

Explanation:

Before:

Equity is calculated as:

= Total Assets / Equity Multiplier

= $ 175,000 / 1.2

= $ 145,833

Therefore, ROE will be:

= (Turnover × Profit Margin) / Equity

= ($ 395,000 × 5.3%) / $ 145,833

= $ 20935 / $145,833

= 0.1436

= 14.36%

After:

New Total Assets will be:

= $ 175,000 - $ 51,000

= $ 124,000

Equity

= Total Assets / Equity Multiplier

= $ 124,000 / 1.2

= $ 103,333

ROE will then be:

= (Turnover × Profit Margin) / Equity

= ($ 395,000 × 5.3%) / $ 103,333

= $ 20935 / $ 103,333

= 0.2026

= 20.26%

Therefore, the change in ROE will be:

= 20.26% - 14.36%

= 5.9%

= 4.035%

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We live in a society which contains many kinds of people living around us. May times we all differ from each other. There are people are people around us from different backgrounds, race, caste, creed etc. With these different people, there are some people who are being oppressed for a long time in our society. These people are the victim of oppression. Due to this oppression and inequality, we have made a generalization that some people are victims and some are an oppressor. But this idea is somewhat flawed. For example, white skin women fight for the right to equality of women but little did they understand that white skin people have been oppressing black people for ages.

We live in a world where a group of people says about the oppression which they have faced at maximum. They talk about extreme oppression case of the people. People should know that these cases and concepts of oppression are full of contradictions and errors. In this world, If we look closely, we will come to know that there are only a few people who are pure victims of this oppression , otherwise, we all have oppressed other people at one point or another.

If we look closely to ourselves then, we’ll come to know that there is a piece of oppressor inside us. And this is the reason that world is having more oppressors and very less pure victims. We should look at our behavior while talking to other people, especially those who are in a minority so that we can take care of the piece of oppressor within us. In order to take care of this inequality, we need to understand new visions of what is oppression. When we’ll look at the terms closely, our ideas and vision can lead to short-term social changes and revolutions.

People talk about inequality and oppression most of the times, but they forget that sometimes, the oppressed people have many privileges based on their care, color, creed, gender etc. These things should be much more talked and taken care of. There are also some people who are oppressor according to some culture and oppressed according to another. Thus, we need some more info and a New vision to look into these flaws of the society. And it is seen many times that these institutions are interlocked.

The society we live in is a complex web of problematic relationship with the people living in it. There is a kind of cobwebs in the society these days. All people are having problems and personal issues living in the society. This is a part where inequality also plays a major role. We genuinely and sincerely need a new vision to fight this inequality.

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