Finance ch. 4 - numbers are in millions of dollars Cash $...

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11. Austin & Company has a debt ratio of 0.5, a total assets turnover ratio of 0.25, and a profit margin of 10%. The Board of Directors is unhappy with the current return on equity (ROE), and they think it could be doubled. This could be accomplished (1) by increasing the profit margin to 12% and (2) by increasing debt utilization. Total assets turnover will not change. What new debt ratio, along with the new 12% profit margin, would be required to double the ROE? A) 55% B) 70% C) 65% D) 75% E) 60% Points Earned: 0.0/5.0 Correct Answer(s): B 12. SCENARIO 4-3 Miller Technologies recently reported the following balance sheet in its annual report (all
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Unformatted text preview: numbers are in millions of dollars): Cash $ 100 Accounts payable $ 300 Accounts receivable 300 Notes payable 500 Inventory 500 Total current liabilities $ 800 Total current assets $ 900 Long-term debt 1,500 Total debt $2,300 Common stock 500 Retained earnings 400 Net fixed assets 2,300 Total common equity $ 900 Total assets $3,200 Total liabilities and equity $3,200 Miller also reported sales revenues of $4.5 billion and a 20% ROE for this same year. What is Miller's ROA? A) 4.625% B) 3.125% C) 7.826% D) 5.625% E) 2.500% Points Earned: 5.0/5.0 Correct Answer(s): D...
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This note was uploaded on 11/04/2009 for the course BUS FIN 2100 taught by Professor Shmidl during the Spring '09 term at Laramie County Community College.

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Finance ch. 4 - numbers are in millions of dollars Cash $...

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