Professional Documents
Culture Documents
Question: Austral & Company Has A Debt Ratio of 0.5, A Total Assets Turnover Ratio of 0.25, and A Pro ..
Question: Austral & Company Has A Debt Ratio of 0.5, A Total Assets Turnover Ratio of 0.25, and A Pro ..
home / study / business / nance / nance questions and answers / austral & company has a debt ratio
Find
of... solutions for your homework
Austral & 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?
Expert Answer
Anonymous
answered this
= 10 * .25 * 2
= 5%
**Let Asset be 1 so debt = 1*.50 = .50 .Equity = total asset - total debt
= 1 /.50
= 2
= .70
0 Comments
0
Practice with similar questions
Your company has a debt ratio of .5, a total assets turnover ratio of .25, and a pro t margin of 8 percent.
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 pro t margin to 10 percent, and (2) by
increasing debt utilization. Total asset turnover will not change. What new...
See answer 100% (2 ratings)
Midwest Packaging's ROE last year was only 3%; but its management has developed a new operating
plan that calls for a debt-to-assets ratio of 60%, which will result in annual interest charges of
$300,000.00. The rm has no plans to use preferred stock. Management projects EBIT of $1,000,000
on sales of $10,000,000, and it expects to have a total assets turnover ratio of 2.0. Under...
See answer 100% (13 ratings)
Info Technics Inc. has total assets equal to $1,000,000. Its total current liabilities equal $200,000 and it
has no short-term debt. The rm’s total equity equals $500,000. What is the rm’s total debt to total
capital ratio? a. 25.00% b. 42.75% c. 45.00% d. 37.50% e. 30.33%
See answer 100% (4 ratings)
Show more
COMPANY
CHEGG NETWORK
CUSTOMER SERVICE