A firm has a Return on Assets and Return on Equity that are bothlower than...

A firm has a Return on Assets and Return on Equity that are both lower than its industry averages. Its Debt Ratio and Total Asset Turnover both equal its industry average. This firm’s main problem is that:

	a.	its debt is too low
	b.	its Return on Equity is too low.
	c.	its operating costs are too low.
	d.	its Profit Margin on Sales is too low.

Solutions

Expert Solution

Its Debt Ratio and Total Asset Turnover both equal its industry average which means that Debt and Sales are in line with the industry while firm has a Return on Assets and Return on Equity that are both lower than its industry average which means that Net Income are low. i.e. Profit Margin on sales is too low,

Option d is correct.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Why is the return on equity greater than the return on assets if the cost of...

Why is the return on equity greater than the return on assets if the cost of debt is less than the ROA? Why is the ROE less than the ROA if the cost of debt is greater than the ROA? Why does the ROE equal the ROA if the cost of debt is equal to the ROA?

The return on assets of a firm is 25.20%. (a) If the firm has a profit...

The return on assets of a firm is 25.20%. (a) If the firm has a profit margin of 7%, its total asset turnover is ___________. (b) If the firm has a debt-to-total-assets ratio of 50%, the firm’s return on equity is __________. Consider the following items. For each item determine if it results in an increase or a decrease in cash flow: (c) Increase in account receivable (d) Depreciation expense

Plot since 1990 the return on equity of small banks (banks with assets of less than...

Plot since 1990 the return on equity of small banks (banks with assets of less than $1 billion; FRED code: US1ROE) and large banks (banks with assets of greater than $15 billion; FRED code: USG15ROE).How do you explain the long-run pattern?

Isolation Company has debt-equity ratio of 0.7. Return on Assets is 9% and total equity is...

Isolation Company has debt-equity ratio of 0.7. Return on Assets is 9% and total equity is 511,312. What is the Net Income

A firm has a return on equity of 14.60 percent and a profitmargin of 10...

A firm has a return on equity of 14.60 percent and a profit margin of 10 percent. What is the return on assets if the equity multiplier is 1.4?A. 10.43% B. 11.48% C. 11.55% D. 20.16%

A firm has ROA (Return on Assets) of 15% and has the debt-equityratio of 45%....

A firm has ROA (Return on Assets) of 15% and has the debt-equity ratio of 45%. What's the firm's ROE (Return on Equity)?

Brown and Co. has a return on assets of 14 percent, an equity multiplier of 1.8,...

Brown and Co. has a return on assets of 14 percent, an equity multiplier of 1.8, and a dividend payout ratio of 40 percent. What is the firm’s internal rate of growth? 9.17% None of the above 5.93% 7.80% 7.68%

Company R has a return on assets of 12 percent, an equity multiplier of 1.6, and...

Company R has a return on assets of 12 percent, an equity multiplier of 1.6, and a dividend payout ratio of 40 percent. What is Company R's internal rate of growth? A.7.68 percent B.7.76 percent C.7.90 percent D.7.50 percent

Sales/Total assets = 4.5× Return on assets (ROA) = 10.0% Return on equity (ROE) = 50.0%...

Sales/Total assets = 4.5× Return on assets (ROA) = 10.0% Return on equity (ROE) = 50.0% Book Value of Stockholders’ equity = $30 Price/Earnings ratio = 6.0x Common shares outstanding = 50 Market/Book ratio = 3.0x A. Calculate the price of a share of the company’s common stock. B. Calculate debt-to-assets ratio assuming the firm uses only debt and common equity. C. What were sales last year? D. What is the company’s market value?

Hanan corporation has the following relationships: Return on assets (ROA) 4%, Return on equity (ROE) 8%....

Hanan corporation has the following relationships: Return on assets (ROA) 4%, Return on equity (ROE) 8%. What is the equity ratio? Select one: a. 25% b. 40% c. 50% d. 60% IF CDD has sales revenues of $300,000 and inventory turnover 5x. Find the company ending inventories? Select one: a. $300,000 b. $50,000 c. $240,000 d. $60,000 Find the price of a corporate bond which has a par value of $1000 and coupon payment is 5% and yield is 8%....

Subjects