year Central Chemicals had sales of $205,000, assets of $127,500, a profit margin of 5.3%, and an equity multiplier of 1.2 The CFO believes that the company could reduce its assets by $21,000 without affecting either sales or costs Had it reduced its assets in this amount, and had the debt ratio, sales, and costs remained constant, by how much would the ROE have changed?

Question

Quizplus · Accepted Answer

The ROE would have increased by 2.02% because the reduction in assets would have increased the asset turnover ratio, which would have increased the profit margin.

Year Central Chemicals Had Sales of $205,000, Assets of $127,500