Question

LeCompte Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $720,000, and its net income after taxes was $24,655. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would LeCompte need in order to achieve the 15% ROE, holding everything else constant?

Select the correct answer.

LeCompte Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $720,000, and its net income after taxes was $24,655. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would LeCompte need in order to achieve the 15% ROE, holding everything else constant? Select the correct answer. a. 6.84% b. 7.48% c. 6.52% d. 6.20% e. 7.16% Bonner Corp.'s sales last year were $350,000, and its year-end total assets were $355,000. The average firm in the industry has a total assets turnover ratio (TATO) of 2.4. Bonner's new CFO believes the firm has excess assets that can be sold so as to bring the TATO down to the industry average without affecting sales. By how much must the assets be reduced to bring the TATO to the industry average, holding sales constant? Use the year-end balance in your calculations. Select the correct answer. a. $208,808 b. $208,898 c. $209,077 d. $208,988 e. $209,167 Days Sales Outstanding Greene Sisters has a DSO of 22 days. The company's average daily sales are $32,000. What is the level of its accounts receivable? Assume there are 365 days in a year. $   Debt Ratio Vigo Vacations has $196 million in total assets, $5.2 million in notes payable, and $26.5 million in long-term debt. What is the debt ratio? Round your answer to two decimal places. % ROE Needham Pharmaceuticals has a profit margin of 3% and an equity multiplier of 2.2. Its sales are $100 million and it has total assets of $48 million. What is its Return on Equity (ROE)? Round your answer to two decimal places. % Du Pont Analysis Gardial & Son has an ROA of 8%, a 4% profit margin, and a return on equity equal to 17%. What is the company's total assets turnover? Round your answer to two decimal places. What is the firm's equity multiplier? Round your answer to two decimal places.

Bonner Corp.'s sales last year were $350,000, and its year-end total assets were $355,000. The average firm in the industry has a total assets turnover ratio (TATO) of 2.4. Bonner's new CFO believes the firm has excess assets that can be sold so as to bring the TATO down to the industry average without affecting sales. By how much must the assets be reduced to bring the TATO to the industry average, holding sales constant? Use the year-end balance in your calculations.

Select the correct answer.

a. $208,808

b. $208,898

c. $209,077

d. $208,988

e. $209,167

Days Sales Outstanding

Greene Sisters has a DSO of 22 days. The company's average daily sales are $32,000. What is the level of its accounts receivable? Assume there are 365 days in a year.

$  

Debt Ratio

Vigo Vacations has $196 million in total assets, $5.2 million in notes payable, and $26.5 million in long-term debt. What is the debt ratio? Round your answer to two decimal places.

%

ROE

Needham Pharmaceuticals has a profit margin of 3% and an equity multiplier of 2.2. Its sales are $100 million and it has total assets of $48 million. What is its Return on Equity (ROE)? Round your answer to two decimal places.

%

Du Pont Analysis

Gardial & Son has an ROA of 8%, a 4% profit margin, and a return on equity equal to 17%.

1. What is the company's total assets turnover? Round your answer to two decimal places.
   
2. What is the firm's equity multiplier? Round your answer to two decimal places.

Answer 1

1)

ROE = Profit Margin (Profit/Sales)×Total Asset Turnover (Sales/Assets)×Equity Multiplier (Assets/Equity)

15% = Profit margin×($720,000/$312,900)×($312,900/$312,900)

Profit margin = 6.52%

Hence, correct option is C. 6.52%