Wilde Corporation owns 30% of the outstanding stock of Bernie Inc. Bernie recorded net income of $10M and paid dividends of $3M in 2006. For each of the following ratios, state the effect (higher, lower or no effect) that the use of the equity method would have on Wilde's financial ratios compared to the use of the cost method in 2006. Explain your answers.
i. Gross margin
ii. Total Asset turnover
iii. Cash flow from operations to current liabilities
iv. Debt to Equity

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The Answer of Wilde Corporation owns 30% of the outstanding stock of Bernie Inc. Bernie recorded net income of $10M and paid dividends of $3M in 2006. For each of the following ratios, state the effect (higher, lower or no effect) that the use of the equity method would have on Wilde's financial ratios compared to the use of the cost method in 2006. Explain your answers.
i. Gross margin
ii. Total Asset turnover
iii. Cash flow from operations to current liabilities
iv. Debt to Equity

Wilde Corporation Owns 30% of the Outstanding Stock of Bernie