Which of the following statements is true about return on equity (ROE)? Multiple Choice It measures...
Which of the following statements is true about return on equity (ROE)?
Multiple Choice
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It measures the return on common stockholders’ investment in the assets of the firm.
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The value of the firm’s ROE is affected by net income.
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The value of the firm’s ROE is affected by the amount of financial leverage or debt that the firm uses.
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All of these choices are correct.
Homework Answers
The following statements is true about return on equity (ROE):-
d) All of these choices are correct.
Add Answer to:
Which of the following statements is true about return on equity
(ROE)?
Multiple Choice
It measures...
1. The effect of financial leverage on ROE Companies that use debt in their capital structure are said to be usin...
1. The effect of financial leverage on ROE Companies that use debt in their capital structure are said to be using financial leverage. Using leverage can increase shareholder returns, but leverage also increases the risk that shareholders bear. Consider the following case: Newtown Propane is a small company and is considering a project that will require $700,000 in assets. The project will be financed with 100% equity. The company faces a tax rate of 25%. What will be the ROE...
Return on investment can be split into which of the following two measures? Multiple Choice Investment...
Return on investment can be split into which of the following two measures? Multiple Choice Investment center income and profit margin. Profit margin and net income. Investment center average assets and investment turnover Residual income and operating income. Profit margin and investment turnover
Which of these statements apply MM Proposition II without taxes? I. The expected return on equity...
Which of these statements apply MM Proposition II without taxes? I. The expected return on equity is positively related to leverage. II. The value of a firm cannot be changed by changing its capital structure. III. Risk to equity holders increases with leverage. IV. The expected return on equity is affected by the firm's debt-to-equity ratio. Multiple Choice II and IV only I, II, and III only I, III, and IV only I and III only I, II, III, and...
10. The effect of financial leverage on ROE Companies that use debt in their capital structure...
10. The effect of financial leverage on ROE Companies that use debt in their capital structure are said to be using financial leverage. Using leverage can increase shareholder returns, but leverage also increases the risk that shareholders bear. Consider the following case: Water and Power Co. is a small company and is considering a project that will require $700,000 in assets. The project will be financed with 100% equity. The company faces a tax rate of 25%. What will be...
Which of the following statements are correct in relation to Modigliani and Miller’s propositions in a...
Which of the following statements are correct in relation to Modigliani and Miller’s propositions in a frictionless perfect capital market? A. The required return on assets is equal to the weighted average cost of capital. B. The risk of a firm’s equity is determined by the debt-equity (D/E) ratio. C. A firm’s cost of equity is a linear function of the debt-equity (D/E) ratio. D. The cost of equity declines when the amount of leverage used by a firm rises....
MUST SHOW ALL WORK The DuPont formula relates return on equity (Net income + Stockholders equity)...
MUST SHOW ALL WORK The DuPont formula relates return on equity (Net income + Stockholders equity) to the company's net profit margin- Net income sales asset turnover (SalesTotal assets and equity multiplier (Total assets Stockholders equity). This Company is in an industry where the average net profit margin is 6.19%, the debt-to-asset ratio (Debt. Total assets) is 27.9%, and return on equity is 20.22% Find below the Company's financial statements for year 2525 Balance Sheet, 12/31/2525 Income, 1/1 - 12/31/2525...
Which of the following is a true statement? Multiple Choice Expenses increase owners’ equity and decrease...
Which of the following is a true statement? Multiple Choice Expenses increase owners’ equity and decrease liabilities. Revenue decreases owners’ equity and expenses increase owners’ equity. Revenue increases owners’ equity and expenses decrease owners’ equity. Revenue decreases owners’ equity and increases liabilities. Which of the following statements is not true regarding the adoption of ASC Topic 606 guidance for revenue recognition? Multiple Choice When using the cumulative approach, the prior three years of financial statements need to be restated. Under...
Assume you are given the following abbreviated financial statements: (attached) On the basis of this information,...
Assume you are given the following abbreviated financial
statements: (attached) On the basis of this information, calculate
as many liquidity, activity, leverage, profitability, and common
stock measures as you can.(Note: Assume the current market price
of the common stock is $62.65 per share. * huge thumbs up for
correct answers*
Liquidity measures:
The current ratio is ? (Round to two decimal places.)
The firm's net working capital is (blank million) ? (Round to
the nearest million dollars.)
Activity measures:
The...
Which of these statements (or sets of statements) are true about the equity beta? A. It...
Which of these statements (or sets of statements) are true about the equity beta? A. It is a measure of systematic risk. B. It measures both systematic financial and systematic business risk. C. Increasing debt in the capital structure increases the equity beta. D. A, B, and C are all true E. Only A and B
Which of the following is NOT true about financial statements?
5.Which of the following is NOT true about financial statements?the balance sheet reports the financial position of a business at a particular point in timethe income statement reports the net cash received during the period as a result of operating activitiesthe statement of cash flows reports the inflows and outflows of cash for the periodthe statement of stockholders' equity includes information about net income and dividends for the period6.Which of the following best describes the purpose of the balance sheet?summarize...
Return on investment can be split into which of the following two measures? Multiple Choice Investment center income and profit margin. Profit margin and net income. Investment center average assets and investment turnover Residual income and operating income. Profit margin and investment turnover
MUST SHOW ALL WORK The DuPont formula relates return on equity (Net income + Stockholders equity) to the company's net profit margin- Net income sales asset turnover (SalesTotal assets and equity multiplier (Total assets Stockholders equity). This Company is in an industry where the average net profit margin is 6.19%, the debt-to-asset ratio (Debt. Total assets) is 27.9%, and return on equity is 20.22% Find below the Company's financial statements for year 2525 Balance Sheet, 12/31/2525 Income, 1/1 - 12/31/2525...
Assume you are given the following abbreviated financial
statements: (attached) On the basis of this information, calculate
as many liquidity, activity, leverage, profitability, and common
stock measures as you can.(Note: Assume the current market price
of the common stock is $62.65 per share. * huge thumbs up for
correct answers*
Liquidity measures:
The current ratio is ? (Round to two decimal places.)
The firm's net working capital is (blank million) ? (Round to
the nearest million dollars.)
Activity measures:
The...
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