Two hypothetical firms have the same net income and the same total assets. One firm has...
Two hypothetical firms have the same net income and the same total assets. One firm has much higher Return on Equity (ROE). It must be true that:
The firm with the higher ROE must have less leverage in the capital structure
The firm with the higher ROE must have more leverage in the capital structure
All else equal, differences in leverage will not affect ROE
Increased leverage can only decrease risk, but not increase returns
None of the above
Homework Answers
It must be true that:
The firm with the higher ROE must have less leverage in the capital structure
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Two hypothetical firms have the same net income and the same
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5. Highly leveraged firms have higher ROE than lower leveraged firms. 6. All things equal, the higher a company's inventory turnover rate, the better. 7. All else being equal, a higher financial leverage will increase a company's debt rating and decrease the interest rate it must pay. 8. Vertical analysis examines changes in financial data across time. 9. A current ratio greater than 1.0 is generally desirable for a company. 10. Return on assets can be disaggregated into profit margin...
Company A has Return On Equity (ROE) of 25%. The company just declared a dividend payment....
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Respecfully--Please answer all if you are willing to help. This is over MM propositions anf optimal...
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over MM propositions anf optimal capital structure theories
QUESTION 1 With perfect capital markets, because different choices of capital structure offer a benefit to investors, the capital structure affects the value of a firm. True False QUESTION 2 Under the assumptions of Modigliani and Miller, a firm's value does not depend on the fraction of its financing that it raises from debt holders vs. equity holders. True False QUESTION...
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Are my answers right? what is the answer for 2? The total risk in a firm...
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The total risk in a firm is determined by evaluating the firm's business risk and financial risk. True or False: All other things being equal, firms exhibiting high degrees of operating leverage exhibit lower levels of business risk This statement is: True False The use of financial leverage, or fixed-cost sources of capital, involves a trade-off between its effect on the firm's shareholders and its effect on the riskiness of...
Correctly answer each part of question 4 4. Debt management ratios Aa Aa Companies have the...
Correctly answer each part of question 4
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5. Highly leveraged firms have higher ROE than lower leveraged firms. 6. All things equal, the higher a company's inventory turnover rate, the better. 7. All else being equal, a higher financial leverage will increase a company's debt rating and decrease the interest rate it must pay. 8. Vertical analysis examines changes in financial data across time. 9. A current ratio greater than 1.0 is generally desirable for a company. 10. Return on assets can be disaggregated into profit margin...
Respecfully--Please answer all if you are willing to help. This is
over MM propositions anf optimal capital structure theories
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