Klein Cosmetics has a profit margin of 5.0%, a total assets turnover ratio of 1.5 times, no debt and therefore an equity multiplier of 1.0, and an ROE of 7.5%. The CFO recommends that the firm borrow money, use the funds to buy back stock, and raise the equity multiplier to 2.0. The size of the firm (assets) would not change. She thinks that operations would not be affected, but interest on the new debt would lower the profit margin to 4.5%. This would probably be a good move, as it would increase the ROE from 7.5% to 13.5%.
Answer the following statement true (T) or false (F)
True
Rationale: DuPont equation: ROE = PM × TATO × Equity multiplier. Given the data, the statement is true.
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Answer the following statements true (T) or false (F)
1) The letter "I" in the Six Sigma acronym DMAIC stands for Improve. 2) As per the Risk and Return evaluation matrix for Six Sigma projects, projects that are home runs have a high risk and high return factor. 3) Waste of excess capacity is one of the seven wastes identified by Shigeo Shingo in a process. 4) The wastage due to overproduction is known as kaizen. 5) Kanban is a statistical tool used for quality management and process improvement.
Data concerning Lemelin Corporation's single product appear below: Per UnitPercent of SalesSelling price$230 100%Variable expenses 115 50%Contribution margin$115 50%The company is currently selling 7,000 units per month. Fixed expenses are $581,000 per month.The marketing manager would like to cut the selling price by $18 and increase the advertising budget by $37,000 per month. The marketing manager predicts that these two changes would increase monthly sales by 1,600 units. What should be the overall effect on the company's monthly net operating income of this change?
A. increase of $302,200 B. increase of $118,200 C. decrease of $7,800 D. decrease of $118,200
The ____________________ is the amount of cash that could have been paid for the asset on the date of purchase.
Fill in the blank(s) with the appropriate word(s).
Divisional management stated that a recent gross margin increase was due to increased efficiency in manufacturing operations. Which of the following audit procedures would be most relevant to that assertion?
a) Select a sample of finished goods inventory and trace raw materials cost back to purchase prices to determine the accuracy of the recorded raw materials price. b) Obtain a physical count of inventory. c) Take a physical inventory of equipment to determine if there were significant changes. d) Select a sample of products, then compare costs per unit this year to those of last year, test cost buildups, and analyze standard cost variances.