A company has $200 billion of sales and $10 billion of net income.Its total assets are $100 billion, financed half by debt and half bycommon equity. What is its profit margin? (5%) What is its ROA?(10%) What is its ROE? (20%) Would ROA increase if the firm usedless leverage? (Yes) Would ROE increase? (No)
A company has $200 billion of sales and $10 billion of net income.Its total assets are $100 billion, financed half by debt and half bycommon equity. What is its profit margin? (5%) What is its ROA?(10%) What is its ROE? (20%) Would ROA increase if the firm usedless leverage? (Yes) Would ROE increase? (No)
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter17: Dynamic Capital Structures And Corporate Valuation
Section: Chapter Questions
Problem 2P
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A company has $200 billion of sales and $10 billion of net income.
Its total assets are $100 billion, financed half by debt and half by
common equity. What is its profit margin? (5%) What is its ROA?
(10%) What is its ROE? (20%) Would ROA increase if the firm used
less leverage? (Yes) Would ROE increase? (No)
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