Fundamentals of Financial Management, Concise Edition (MindTap Course List)
9th Edition
ISBN: 9781305635937
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 6Q
Summary Introduction
To identify: The way to improve the
Introduction:
DuPont Analysis: Under DuPont analysis, return on equity can be calculated as a product of profit margin, total assets turnover and equity multiplier.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
If a firm’s ROE is low and management wants to improve it, explain how using more debtmight help.
Which of the following is a valid reason for a firm not to use as much debt as it can raise?
Group of answer choices
The use of more debt is expected to result in an increase in the firmʹs cost of capital when everything is considered
More debt will increase the firmʹs riskiness
All of them are valid reasons for a firm to use less debt than might be available
The use of more debt is expected to result in a lower price/earnings ratio
Which of the following is a disadvantage of long-term debt as a means of company financing?
Group of answer choices
Debtholders have preferential status in the event of a company being wound up.
Tax relief is available on interest payments.
Debt is often quicker to arrange compared to equity.
The amount and timing of interest payments is predictable, making budgeting easier.
Chapter 4 Solutions
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Ch. 4 - Financial ratio analysis is conducted by three...Ch. 4 - Prob. 2QCh. 4 - Over the past year, M.D. Ryngaert Co. had an...Ch. 4 - Profit margins and turnover ratios vary from one...Ch. 4 - How does inflation distort ratio analysis...Ch. 4 - Prob. 6QCh. 4 - Give some examples that illustrate how (a)...Ch. 4 - Why is it sometimes misleading to compare a...Ch. 4 - Suppose you were comparing a discount merchandiser...Ch. 4 - Prob. 10Q
Ch. 4 - Differentiate between ROE and ROIC.Ch. 4 - Indicate the effects of the transactions listed in...Ch. 4 - DAYS SALES OUTSTANDING Baxley Brothers has a DSO...Ch. 4 - DEBT TO CAPITAL RATIO Kayes Kitchenware has a...Ch. 4 - DuPONT ANALYSIS Hendersons Hardware has an ROA of...Ch. 4 - MARKET/BOOK RATIO Edelman Engines has 17 billion...Ch. 4 - PRICE/EARNINGS RATIO A company has an EPS of 2.40,...Ch. 4 - DuPONT AND ROE A firm has a profit margin of 3%...Ch. 4 - Prob. 7PCh. 4 - DuPONT AND NET INCOME Precious Metal Mining has 17...Ch. 4 - BEP, ROE, AND ROIC Broward Manufacturing recently...Ch. 4 - M/B AND SHARE PRICE You are given the following...Ch. 4 - RATIO CALCULATIONS Assume the following...Ch. 4 - Prob. 12PCh. 4 - TIE AND ROIC RATIOS The W.C. Pruett Corp. has...Ch. 4 - Prob. 14PCh. 4 - RETURN ON EQUITY AND QUICK RATIO Lloyd Inc. has...Ch. 4 - Prob. 16PCh. 4 - CONCEPTUAL: RETURN ON EQUITY Which of the...Ch. 4 - TIE RATIO MPI Incorporated has 6 billion in...Ch. 4 - CURRENT RATIO The Stewart Company has 2,392,500 in...Ch. 4 - DSO AND ACCOUNTS RECEIVABLE Ingraham Inc....Ch. 4 - Prob. 21PCh. 4 - Prob. 22PCh. 4 - RATIO ANALYSIS Data for Barry Computer Co. and its...Ch. 4 - DuPONT ANALYSIS A firm has been experiencing low...Ch. 4 - RATIO ANALYSIS The Corrigan Corporations 2015 and...Ch. 4 - Prob. 1DQCh. 4 - Prob. 2DQCh. 4 - Looking at Morningstars Profitability ratios, what...Ch. 4 - Prob. 4DQCh. 4 - Prob. 5DQCh. 4 - From the Google Finance site, look at Hewlett...Ch. 4 - From the Google Finance site, use the DuPont...Ch. 4 - Prob. 8DQ
Knowledge Booster
Similar questions
- Is it better to finance a company thru debt or thru equity? Why? What are the downside and upside to each?arrow_forwardThe key benefits associated with refunding debt are the reduction in the firm's debt ratio and the creation of more reserve borrowing capacity. true or false explainarrow_forwardWhich of the following is most consistent with using debt to reduce agency costs or conflicts? Question 11 options: Increasing debt reduces a firm’s business risk The interest paid on debt reduces taxable income and income taxes The interest paid on debt reduces cash that management of a firm might otherwise waste or use poorly The issuance of debt helps firms increase their credit ratingarrow_forward
- Which is the quickest way to determine whether a firm has too much debt?arrow_forwardWhich of the following statements is FALSE? As debt increases, the risk associated with bankruptcy and agency costs is reduced. Debt is often the least costly form of financing for a firm. Firms should probably use some debt in their capital structure. Different firms are subject to different levels of risk.arrow_forwardWhich of the following makes this a true statement? In this slightly more realistic world with corporate taxes, managers can: Multiple Choice maximize the firm's value by taking on as much equity as possible. maximize the firm's value by taking on as much debt as possible. minimize the firm's value by taking on as much debt as possible. maximize the firm's value by financing only with debt.arrow_forward
- An analyst at a company notes that its cost of debt is far below that of equity. He concludes that it is important for the firm to maintain the ability to increase its borrowing because if it cannot borrow, it will be forced to use more expensive equity to finance some projects. This might lead it to reject some projects that would have seemed attractive if evaluated at the lower cost of debt. How do you balance the amount of equity and debt? Explain the significance of maintaining the ability to increase borrowing capacity for a company with a lower cost of debt compared to equity. How does this impact project evaluation and investment decisions, and what role does the concept of cost of capital play in such considerations?arrow_forward11.Explain why a firm needs to understand their allocation of debtfinancing to equity (the amount the owner used to fund thebusiness). Discuss how this allocation can impact their Total DebtRatio. Can having too much debt bring down profit margins? Why orWhy Not?arrow_forwardI don´t undertand why Office Depot has the greatest possibility if the Debt ratio is higher which means that the company has a higher indebtedness?? Sorry is my first course =(arrow_forward
- Managers may sometimes be criticized for being overly conservative. If a firmdoes not borrow as much as it should, reach its optimal capital structure, andcomment on the market forces that might pressure management to use more debt.arrow_forwardWhich of the following statements is usually correct? A low receivables turnover is good for the business The lower the total debt-to-equity ratio, the lower the financial risk for a firm The higher the tax rate for a firm, the lower the interest coverage ratio An increase in net profit margin with no change in sales or assets means a poor ROIarrow_forwardDoes decreasing net margin percentages and slightly increasing financial leverage have an effect on Return on Equity (ROE)?. If Yes, What should a company do to solve such problem.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTIntermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning