Question

In: Finance

Gates Appliances has a return-on-assets (investment) ratio of 22 percent.    a. If the debt-to-total-assets ratio...

Gates Appliances has a return-on-assets (investment) ratio of 22 percent.
  
a. If the debt-to-total-assets ratio is 50 percent, what is the return on equity?

Solutions

Expert Solution

a.

Debt + Equity = Total Assets (TA)

TA would be always 100%.

Since debt to TA is 50%, the calculation of Equity is as below:

50% + Equity = 100%

Equity = 100% - 50%

            = 50%

Again given,

Return on assets (ROA) = 22%

(Return/TA) × 100 = 22%

(Return / 100) × 100 = 22%

Return = 22%

Therefore,

Return on Equity = (22% / 50%) × 100

                             = (22 / 50) × 100

                             = 2200 / 50

                             = 44% (Answer)


Related Solutions

Total assets = $500,000, total asset turnover = 1.40, total debt ratio = 0.30, return on...
Total assets = $500,000, total asset turnover = 1.40, total debt ratio = 0.30, return on assets = 8.60%. What is the return on equity? A. Below 6.55% B. Between 6.55% and 8.05% C. Between 8.05% and 9.55% D. Between 9.55% and 11.05% E. Between 11.05% and 12.55% F. Between 12.55% and 14.05% G. Between 14.05% and 15.55% H. Above 15.55%
15. SME Company has a debt-equity ratio of .60. Return on assets is 7.7 percent, and...
15. SME Company has a debt-equity ratio of .60. Return on assets is 7.7 percent, and total equity is $520,000. a. What is the equity multiplier? b. What is the return on equity? c. What is the net income?
1) SME Company has a debt-equity ratio of .57. Return on assets is 7.9 percent, and...
1) SME Company has a debt-equity ratio of .57. Return on assets is 7.9 percent, and total equity is $620,000. a. What is the equity multiplier? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the return on equity? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) c. What is the net income? (Do not round intermediate calculations and round...
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
Isolation Company has a debt–equity ratio of 0.7. Return onassets is 7 percent, and total...
Isolation Company has a debt–equity ratio of 0.7. Return on assets is 7 percent, and total equity is $526,004.What is the net income? (round 2 decimal places)
Sales were $1,840,000, the total debt ratio was .37, and total debt was $673,000. What is the return on assets (ROA)?
Return on Assets A fire has destroyed a large percentage of the financial records of the Excandesco Company. You have the task of piecing together information in order to release a financial report. You have found the return on equity to be 12.9 percent. Sales were $1,840,000, the total debt ratio was .37, and total debt was $673,000. What is the return on assets (ROA)?Return on Equity12.90%Sales$ 1,840,000.00Total Debt Ratio                    0.37Total Debt$     673,000.00Return on Assets03.41 Growth and Assets A firm...
Company has debt-to-total assets ratio is 0.4. What is its debt to equity ratio
Company has debt-to-total assets ratio is 0.4. What is its debt to equity ratio
SOLVENCY RATIOS Debt ratio for Walgreens = Total Liabilities / Total assets Debt ratio for Walgreens...
SOLVENCY RATIOS Debt ratio for Walgreens = Total Liabilities / Total assets Debt ratio for Walgreens 2018 = $68,124 / $68,124 = 1 Debt ratio for Walgreens 2017 = $66,009 / $66,009 = 1 Debt ratio for CVS Debt ratio for CVS 2018 = $196,456 / $196,456 = 1 Debt ratio for CVS 2017 = $95,131 / $95,131 = 1 What do the results of this ratio mean in the context of Walgreens? How about CVS? Compare the two -...
1. Quick Ratio= current assets-inventories/ current liabilities 2. Debt to Assets ratio= total debt/total assets 3....
1. Quick Ratio= current assets-inventories/ current liabilities 2. Debt to Assets ratio= total debt/total assets 3. Earnings Per Share (EPS)=total earnings/outstanding shares (must first solve net income-preferred divideneds= total earnings) 4. Net Income (Net profit)=total revenues-total expenses I need help finding the answer to these equations for Target Corporation for 2015 and 2016. please refer to the links for the 10k reports for the company. 2015- https://corporate.target.com/_media/TargetCorp/annualreports/2015/pdfs/Target-2015-Annual-Report.pdf 2016- https://corporate.target.com/_media/TargetCorp/annualreports/2016/pdfs/Target-2016-Annual-Report.pdf?ext=.pdf
The debt-to-total assets ratio is primarily a measure of
The debt-to-total assets ratio is primarily a measure of
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT