Last year Jullan Corp. had sales of P302,225 operating costs of P267,500 and year-end assets of P195,000. The debt-to-total-assets ratio was 27%, the interest rate on the debt was 8.2% and the firm's tax rate was 37%. The new CFO wants to see how the Return on Equity (ROE) would have been affected if the firm had used a 45% debt ratio. Assume that sales and total assets would not be affected, and that the interest rate and tax rate would both remain constant. By how much would the ROE change (increase or decrease in percentage) in response to the change in the capital structure?

Q: Last year, Thomas Co. had a profit margin of 10%, total assets turnover of 0.5, and a debt ratio of…

A: Given: Last year data -  Profit margin =10%  ----------------------(Eq I) Total Asset Turnover =…

Q: Last year Chantler Corp. had $200,000 of assets, $20,000 of net income, and a debt-to-total-assets…

A: ROE = Net income / Shareholders equity Debt/ Total assets = 30% as given 30% = Debt/ 2,00,000 Debt =…

Q: Ghost, Inc., has no debt outstanding and a total market value of $140,000. Earnings before interest…

A: Earnings per share is the sum receivable by a common shareholder from the company on every single…

Q: Macon Mills is a division of Bolin Products, Inc. During the most recent year, Macon had a net…

A: Invested capital is calculated as assets minus non-interest-bearing current liabilities, it can also…

Q: Macon Mills is a division of Bolin Products, Inc. During the most recent year, Macon had a net…

A: Income before tax = Net income / (1 - tax rate) = $36000000/(1-0.40) = $60,000,000 Operating profit…

Q: Dearborn Supplies has total sales of $210 ​million, assets of $108 ​million, a return on equity of…

A: Concept: The debt ratio is defined as the financial ratio that includes the measure of company’s…

Q: Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of 1.75. Its sales…

A:

Q: Last year the Rondoelea Products Company had $142 million in annual sales and a net profit margin…

A: EBIT = [ (Sales x net profit margin) / (1 - tax rate) ] + (Amount of debt * Interest rate) EBIT =…

Q: Last year, Marly Brown, Inc. reported an ROE of 25 percent. The firm’s debt-to-equity was 1.5 times,…

A: Internal growth rate refers to the maximum growth rate a company can achieve without any external…

Q: The newspaper reported last week that Tisch Enterprises earned $34.07 million this year. The report…

A: Retention ratio is the percentage of earnings of a company which a company retains for different…

Q: Macon Mills is a division of Bolin Products, Inc. During the most recent year, Macon had a net…

A: ROI  = Operating Income (1- Tax) / Invested Capital × 100  Invested Capital  = Current Operating…

Q: echcrunch has an equity cost of capital of 10%, a cost of debt is 6%, and a debt to value ratio (D/V…

A: Value of a firm- In free cash flow valuation, the intrinsic value of a company equals the present…

Q: Last year​ Sanderson, Inc. had sales of $3.1 million. The​ firm's cost of goods sold came to $2.1…

A: Taxable Income: When calculating the amount of taxes owing by a person or a business, taxable income…

Q: Rector Corporation, which is currently operating at full capacity, has sales of $29,000, current…

A: Sales, S = $29,000,Current assets, CA = $1,600; Net fixed assets, NFA =  $27,500, Hence, total…

Q: Last year Blease Inc had a total assets turnover of 1.33 and an equity multiplier of 1.75. Its sales…

A: Return on equity (ROE) is a measure to ascertain the profitability position of a company. ROE…

Q: Russell Securities has $100 million in total assets and its corporate tax rate is 40 percent.  The…

A: Before we get into the question, let's understand the two ratios involved in the question:1. BEP =…

Q: A firm generated $697,000 in Sales Revenue, on which it earned Net Income of $139,400. The firm…

A: In sustainable growth rate assumption, the firm will not change its debt equity relationship. We…

Q: The most recent financial statements for Bello, Inc., are shown here:    Income Statement…

A: Percentage of increase in sales =42112-3760037600=12%Increase in Net fixed assets =135000×12%=$16200…

Q: PWC Inc. has a policy of distributing 30% of its current year income after interest and taxes. Which…

A: Company's earning after interest and taxes are divided into two parts i.e. dividend payout and…

Q: Last year Vaughn Corp. had sales of $315,000 and a net income of $17,832, and its year-end assets…

A: Du-Pont: A Du-pont analysis is the equation which calculates the return on equity by multiplying net…

Q: Last year, the Allen Corporation had sales of $12.3 million with the cost of goods sold of…

A: Given the following information: Sales: $12.3 million Cost of goods sold: $3,750,000 Operating…

Q: Last year Vaughn Corp. had sales of $315,000 and a net income of $17,832, and its year-end assets…

A: ROE (Return on Equity) is calculated to show the financial performance of the company which is…

Q: Last year ABC Company had $200,000 of total assets, $25,746 of net income, and a…

A: Return on equity or ROE is referred to as measure of the financial performance that is computed…

Q: Roland & Company has a new management team that has developed an operating plan to improve upon last…

A: Return on equity is a financial metric which measures the earnings made upon shareholder's equity.

Q: Orlando Landscaping has current assets of $5,100, net fixed assets of $23,000, current liabilities…

A: Shareholders Equity = Current Assets + Net Fixed Assets - Current Liabilities - Long Term Debt Net…

Q: Rangoon Corp's sales last year were $400,000, and its year-end total assets were $300,000. The…

A: given sales = $400000 year end total assets = $300000 total asset turnover [TATO] = 2.5 TATO =…

Q: Nutty sales last year were 15, 000 , and its year-end total assets were P355,000. The average firm…

A: The asset turnover ratio measures the efficiency of a company's assets in generating sales.

Q: Miler and Boggs Co. has 3 million in total assets, 1.65 million in equity, and a 500,000-capital…

A: Formula for debt equity ratio: Debt equity ratio = Debt / Equity Given: Total asset = 3 million…

Q: Pacific Packaging’s ROE last year was only 5%, but its managementhas developed a new operating plan…

A: Given information: Debt to capital ratio is 40%, Annual interest charges is $561,000 EBIT is…

Q: Orono Corp.'s sales last year were $575,000, its operating costs were $362,500, and its interest…

A: As per formula Times interest earned (TIE) ratio = (Sales-Operating cost)/Interest expenses   Where…

Q: Mah Seng Company Berhad had total earnings last year of $5 million but expects total earnings to…

A: Residual dividend company pay the all dividends remaining to shareholders.

Q: New Doors Corp. has $375,000 of total assets, and it uses $187,500 of total shareholder's equity…

A: Return on Equity(ROE) = Profit/Equity However, to achieve a 15% ROE with constant sales figure and…

Q: Mah Seng Company Berhad had total earnings last year of $5 million but expects total earnings to…

A: An organization have different kind of dividend policy and residual dividend policy is one of…

Q: Packaging's ROE last year was only 4%, but its management has developed a new operating plan that…

A:

Q: Mah Seng Company Berhad had total earnings last year of $5 million but expects total earnings to…

A:

Q: Last year the P.M. Postem corporation had sales of $419,000, with a cost of goods sold of $111,000.…

A: Income statement is the financial statement of the company that shows the revenue and expenditures…

Q: Macon Mills is a division of Bolin Products, Inc. During the most recent year, Macon had a net…

A: Income before tax = Net income / (1 - tax rate) = $38,000,000 / (1 - 0.40) = $63333333 Add: Interest…

Q: It was reported last week that Blue Bell Enterprises earned $18.5 million this year. The report also…

A: Growth rate = Retention ration * Retrun of equity

Q: Last year Kruse Corp had $355,000 of assets (which is equal to its total invested capital), $403,000…

A:

Q: The most recent financial statements for Mixton, Incorporated, are shown here: Income Statement…

A: Net Income: It is the sum of revenue that is left in the business after paying off all the costs of…

Q: To estimate Missed Places, Inc.’s (MP) external financing needs, the CFO needs to figure out how…

A: Retained earnings: These are the accumulated earnings of the company. These earnings were…

Q: Sam Holdings is planning to open a new wholesaling operation. The target operating profit margin is…

A: Break even  point in dollars  = fixed cost /contribution  ratio

Q: Easy Launch Box recently reported $15,500 of sales, $8,250 of operating costs other than…

A: In this question, we have been asked to find the operating income for which we have been given…

Q: Cheryl Colby, CFO of Charming Florist Ltd., has created the firm’s pro forma balance sheet for the…

A: Balance sheet indicates the financial position of the business entity in the market related to a…

Q: Last year Gray Corp. had net sales of $325,000 and a net income of $19,000, and its year-end assets…

A: Given, Sales = $325,000 Assets = $250,000 Net Income = $19,000 Debt-to-total-capital ratio = 45%

Q: The Malia Corporation had sales in 2015 of $65 million, total assets of $42 million, and total…

A: Given the following information: Sales: $65 million Total assets: $42 million Total liabilities:…

Q: National Co. has a financial break-even point at P260,000. Th company paid an annual interest of…

A: Fianancial Break even point  is the minimum level of EBIT needed to satisfy all the fixed financial…

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.