Which of the following statements is CORRECT?
A) Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60%.Under these conditions, the ROE will increase.
B) Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60%.Without additional information, we cannot tell what will happen to the ROE.
C) The modified Du Pont equation provides information about how operations affect the ROE, but the equation does not include the effects of debt on the ROE.
D) Other things held constant, an increase in the debt ratio will result in an increase in the profit margin on sales.
E) Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10%, and its debt increases from 40% of total assets to 60%.Under these conditions, the ROE will decrease.
Correct Answer:
Verified
Q36: Arshadi Corp.'s sales last year were $52,000,
Q39: Bonner Corp.'s sales last year were $415,000,
Q45: Ziebart Corp.'s EBITDA last year was $390,000
Q51: new firm is developing its business plan
Q58: Rappaport Corp.'s sales last year were $320,000,
Q59: Taggart Technologies is considering issuing new common
Q65: Stewart Inc.'s latest EPS was $3.50, its
Q72: Companies HD and LD have the same
Q75: Companies HD and LD have the same
Q91: Northwest Lumber had a profit margin of
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents