Answered: increasing the company's debts on…

Business

Accounting

increasing the company's debts on Return on Assets (ROA) and Return on Equity (ROE

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 34MCQ: Which of the following ratios is used to measure a firms profitability? a. Liabilities Ă· Equity c....

See similar textbooks

Related questions

Q: It indicates the proportion of debt in relation to resources provided by the owners, a. Debt…

A: Lets understand the basics. Debt to equity ratio is a ratio which compares how much proportionate…

Q: time interest earned indicates a firms long term, debt-paying ability from the balance sheet view…

A: Time interest earned means how many times we are earning profit as compared to interest payment.…

Q: increases in economic benefits during the accounting period in the form of inflows or enhancements…

A: Answer) The correct answer in the given question is: Income

Q: In which of the following financial statements will "changes in working capital" be reported? O A.…

A: Working capital is the amount of capital available with the firm which is used for day to day…

Q: measuring the performance and financial status of an enterprise are provided below. Assets…

A: Accounting: Accounting is a system, or a process of collecting and organizing economic transactions,…

Q: Working Capital is a measure used to assess the liquidity of the company, computed as current assets…

A: The Answer is false Refer step2 for explanation

Q: The current ratio measures a. The ability of a company to quickly collect cash from customers. b.…

A: Current ratio = Current assets / Current liabilities

Q: debt service ratio measures? A. Profitability of the business B. The impact of debt funding to…

A: Debt service ratio means ratio of operating income available for debt service payments like…

Q: The relationship between current assets and current liabilities is a. useful in determining…

A: The answer is as fallows

Q: Using the accounting equation, determine the company’s stockholders’ equity. Compare this amount to…

A: The question provides us with the Income statement and consolidated balance sheet of United Parcel…

Q: Calculate Ebanks, Inc.'s margin and net income. h. Çalculate Ebanks, Inc.'s return on а. equity.

A: Step 1 Calculation of net income: Calculation of Margin:

Q: When analyzing financial statements, creditors are more concerned with which of the following? a.…

A: Financial statement analysis: The process of analyzing the financial statements of a company to…

Q: When a company borrows money from the bank, what is the impact on the accounting equation? Group of…

A: Borrow money from Bank: The process of borrowing money from a bank and repaying it over time: The…

Q: Which one of the following increases the current liabilities of a business entity? Select one: a.…

A: Liabilities are know as the financial obligation or financial debt which has to payable by the…

Q: What amount of total assets have been financed by the creditors and by the stockholders?

A: Total Liabilities= Current Liabilities + Non current liabilities Stockholders equity= Common stock+…

Q: In which account, how do businesses keep track of their profits arising from the sale of tangible…

A: In a business, a situation arises when the firm has to sell its assets due to various reason. On…

Q: e Current Liabilities Compute for the Non-current

A: The current asset as,

Q: A financial document that indicates the success or failure of a business trading .over a period of…

A: Answer : An Income Statement

Q: Which of the following statements best defines equity (capital) of a business? A Equity represents…

A: The accounting equation states that assets equals to sum of liabilities and shareholders equity.

Q: Which of the following is not a component of the statement of changes in equity? * Comprehensive…

A: Owner’s capital is the capital contributed by the proprietors in order to begin and run business…

Q: ne manager wanted to knou nuch liability the company o Which financial statement gi hat information?…

A: Explanation: Balance sheet shows the assets and liabilities of the company. Profit and loss…

Q: What are the accounts in which capital and debts are monitored and which pay the remainder? A) Cost…

A: What are the accounts in which capital and debts are monitored and which pay the remainder?

Q: Consider the following company’s balance sheet and income statement Return on assets. Return on…

A: We need to compute the profitability ratios using the given financial statements.

Q: Under what situation will return on equity be higher than return on investment? a. When assets…

A: (a) When assets exceed liabilities:Suppose assets is $ 70,000 and liabilities is $ 50,000 and net…

Q: Assume the following relationships for the Brown Corporation: Sales / Assets…

A: Computation of profit margin: Hence, the profit margin is 2.00%.

Q: equired: repare the following: • Statement of profit and loss o Statement of changes in equity •…

A: Statement of Profit and loss The purpose of preparing the statement of profit and loss account which…

Q: The most stringent measure of the liquidity status of a business firm. a. Current ratio b. Quick…

A: Current ratio is calculated by dividing the total current assets by the total current liabilities…

Q: What is Return to Equity? Interest paid on debt Revenue minus Costs Only Retained Earnings All of…

A: Return on equity means the net income earned as compared to shareholders equity. The formula for…

Q: The quality of earnings concept indicates thata. stockholders want the corporation to earn enough…

A: Quality of Earning: Quality of earning refers to the quality of the earning capacity of an…

Q: Factors that reflect the ability of a business to pay its debts and earn a reasonable amount of…

Q: Which of the following ratios is used by the company to determine its ability to pay currently…

A: A business organisation is treated as short term solvent if it is in a position to pay currently…

Q: Which of the following should show a profit in order for a financial institution to give a the…

A: When a financial institution has to provide a loan to the business, then it needs the financial…

Q: 1. Define comprehensive income. What are the ways companies can present comprehensive income? 2. How…

Q: A set of financial statement includes Transaction, Statement of Profit or Loss (SOPL), Statement of…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Compute for the current ratio and describe the enterprise's capability to pay with current assets.…

A: Current ratio is the indicator of short term liquidity of the company and debt ratio indicate how…

Q: O Balance sheet In analyzing a company's financial statements, which financial statement would a…

A: Analysing a company's balance sheet provides information about the company's liquidity since it…

Q: A. Other things being equal, which company appears to have the better liquidity position in terms of…

A: Financial ratios are those which provide a summary of the accounts of a company and helps an…

Q: The following sentence should be explained: The balance sheet is a snapshot of a company's financial…

A: A balance sheet is a financial statement that summarises the assets and liabilities over a…

Q: Which financial statement shows that a company’s resources equal claims to those resources? a.…

A: Income Statement conveys a company's ability to generate profits in the current period.

Q: Given the above figures, find BSBA Inc's: a. Accounts receivable b. Current assets C. Total assets…

A: a. Calculation of Accounts Receivable: Days Sales Outstanding (DSO) Ratio = Accounts receivable /…

Question

Explain the effect of increasing the company's debts on Return on Assets (ROA) and Return on Equity (ROE) indicators.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Debt

VIEW

Effect of increasing debt on ROA and ROE

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

What information can best be elicited from a receivable ratio? A. company performance with current debt collection B. credit extension effect on cash sales C. likelihood of future customer bankruptcy filings D. an increase in future credit sales to current customers
The cost of equity is _______. A. the interest associated with debt B. the rate of return required by investors to incentivize them to invest in a company C. the weighted average cost of capital D. equal to the amount of asset turnover
Which of the following ratios is used to measure a firms profitability? a. Liabilities Ă· Equity c. Sales Ă· Assets b. Assets Ă· Equity d. Net Income Ă· Net Sales
Owners equity represents which of the following? A. the amount of funding the company has from issuing bonds B. the sum of the retained earnings and accounts receivable account balances C. the total of retained earnings plus paid-in capital D. the business owners/owners share of the company, also known as net worth or net assets
Using the following Balance Sheet summary information, calculate for the two companies presented: A. working capital B. current ratio Then: A. evaluate which companys liquidity position appears stronger, and why.
What are the distinctive features of ToyJoys income statement? Its statement of retained earnings? Its balance sheet?
When do companies recognize gains and losses from the extinguishment of debt? Where are the gains and losses disclosed on the income statement?
Calculate the projected debt ratio, debt-to-equity ratio, liabilities-to-assets ratio, times-interest-earned ratio, and EBITDA coverage ratios. How does Computron compare with the industry with respect to financial leverage? What can you conclude from these ratios?