Question

EXERCISE 8-6 Rose Corporations condensed balance sheet for Year 2 is reproduced below: Low for Sharbati Current assets... No

REQUIRED
C. demonstrate the favorable effect of leverage given the disaggreation of roce and your answer to part b
EXERCISE 8-6 Rose Corporations condensed balance sheet for Year 2 is reproduced below: Assets Currentassets..... ....... $25
0 0
Add a comment Improve this question Transcribed image text
Answer #1

I have answered the question below

Please upvote for the same and thanks!!!

Do reach out in the comments for any queries

Answer:

Demonstration of the favourable effect:

The favourable effect of leverage is because of the borrowed funds for the capital structure and as ROCE is higher than RNOA

Note: Answer ends above, and the below working is given only for understanding.

$675,000 Financial leverage = 4x100 $1,125,000 = 0.6x100 = 60% Hence the financial leverage is calculated 60% ROCE = RNOA +LE

Add a comment
Know the answer?
Add Answer to:
REQUIRED C. demonstrate the favorable effect of leverage given the disaggreation of roce and your answer...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Johnson Corporation sells primarily two products: (A) consumer cleaners and (B) industrial puri- fiers. Its gross...

    Johnson Corporation sells primarily two products: (A) consumer cleaners and (B) industrial puri- fiers. Its gross margin and components for the past two years are as follows: SALES REVENUE. YEAR 7 YEAR 6 ProductA........................ $60,000 $ 35,000 ProductB............... .........$30,000. $ 45,000 Total.................................. 90,000. 80,000 Deduct cost of goods sold ProductA............... ............50,000 28,000 ProductB............................19,500. 27,000 Total................................... 69,500 55,000 Grossmargin..................... $20,500. 25,000 In Year 6, the selling price of A is $5 per unit, while in Year 7 it is $6 per...

  • Use the information from the Income Statements and Balance Sheets to calculate the ratios in the...

    Use the information from the Income Statements and Balance Sheets to calculate the ratios in the image below for years provided (Numbers 1-6): Please provide examples of each equation used so that I may create an excel file and replicate process. Jan. 27, 2019 12 Months Ended Jan. 28, Jan. 29, 2018 2017 Jan. 31, 2016 $ 11,716 4,545 7,171 $ 9,714 3,892 5,822 $ 6,910 2,847 4,063 $ 5,010 2,199 2,811 1,797 2,376 991 1,463 663 815 3 2,612...

  • H I J K Enter numbers in yellow cells N O P Q R S A...

    H I J K Enter numbers in yellow cells N O P Q R S A B C D E G The condensed balance sheet for Zear at the end of fiscal Year 8 follows the tax rate is 50%): Assets Liabilities and equity Current assets Current liabilities. ................ $2,000,000 Cash. $ 700,000 Long-term 77% debenture .............. 2,000,000 Receivables ....... 1,000,000 6% preferred stock, 10,000 shares, Other .................. 800,000 $100 par value ........... 1,000,000 Total current assets 2,500,000 Common stock....

  • Analysis and Interpretation of ROE and RNOA with No Noncontrolling Interest The 2018 balance sheets and...

    Analysis and Interpretation of ROE and RNOA with No Noncontrolling Interest The 2018 balance sheets and income statement for Netflix Inc. follow. Refer to these financial statements to answer the requirements. NETFLIX INC. Consolidated Statements of Earnings For Year Ended December 31, $ thousands 2018 Revenues $15,794,341 Cost of revenues 9,967,538 Marketing 2,369,469 Technology and development 1,221,814 General and administrative 630,294 Operating income 1,605,226 Other income (expense) Interest expense (420,493) Interest and other income 41,725 Income before income taxes 1,226,458...

  • Analysis and Interpretation of Profitability Balance sheets and income statements for Target Corporation follow. Income Statement...

    Analysis and Interpretation of Profitability Balance sheets and income statements for Target Corporation follow. Income Statement For Fiscal Years Ended ($ millions) 2006 2005 2004 Sales $ 51,271 $ 45,682 $ 40,928 Credit card revenues 1,349 1,157 1,097 Total revenues 52,620 46,839 42,025 Cost of sales 34,927 31,445 28,389 Selling, general and administrative expenses 11,185 9,797 8,657 Credit card expenses 776 737 722 Depreciation and amortization 1,409 1,259 1,098 Earnings before interest and income taxes 4,323 3,601 3,159 Net interest...

  • please help with correct answer. i need help urgently Analysis and Interpretation of Profitability Balance sheets...

    please help with correct answer. i need help urgently Analysis and Interpretation of Profitability Balance sheets and income statements for 3M Company follow. 3M COMPANY Consolidated Statements of Income For Years ended December 31 ($ millions) 2015 2014 2013 Net sales $30,274 $31,821 $30,871 Operating expenses Cost of sales 15,383 16,447 16,106 Selling, general and administrative expenses 6,182 6,469 6,384 Research, development and related expenses 1,763 1,770 1,715 Total operating expenses 23,328 24,686 24,205 Operating income 6,946 7135 6,666 Interest...

  • Analysis and Interpretation of Profitability Balance sheets and income statements for 3M Company follow. Consolidated Statements...

    Analysis and Interpretation of Profitability Balance sheets and income statements for 3M Company follow. Consolidated Statements of Income Years ended December 31 ($ millions), 2007 2006 2005 Net sales $24,462 $22,923 $21,167 Operating expenses Cost of sales 12,735 11,713 10,408 Selling, general and administrative expenses 5,015 5,066 4,631 Research, development and related expenses 1,368 1,522 1,274 Loss/(gain) from sale of business (849) (1,074) Total operating expenses 18,269 17,227 16,313 Operating income 6,193 5,696 4,854 Interest expenses and income Interest expense...

  • Analysis and Interpretation of Profitability Balance sheets and income statements for 3M Company follow. Consolidated Statements...

    Analysis and Interpretation of Profitability Balance sheets and income statements for 3M Company follow. Consolidated Statements of Income Years ended December 31 ($ millions) 2007 2006 2005 Net sales $24,462 $22,923 $21,167 Operating expenses Cost of sales 12,735 11,713 10,408 Selling, general and administrative expenses 5,015 5,066 4,631 Research, development and related expenses 1,368 1,522 1,274 Loss/(gain) from sale of business (849) (1,074) Total operating expenses 18,269 17.227 16,313 Operating income 6,193 5,696 4,854 Interest expenses and income Interest expense...

  • Analysis and Interpretation of Profitability Balance sheets and income statements for 3M Company follow. Consolidated Statements...

    Analysis and Interpretation of Profitability Balance sheets and income statements for 3M Company follow. Consolidated Statements of Income Years ended December 31 ($ millions) 2010 2009 2008 Net sales $26,662 $23,123 $25,269 Operating expenses Cost of sales 13,831 12,109 13,379 Selling, general and administrative expenses 5,479 4,907 5,245 Research, development and related expenses 1,434 1,293 1,404 Loss/(gain) from sale of business -- -- 23 Total operating expenses 20,744 18,309 20,051 Operating income 5,918 4,814 5,218 Interest expenses and income Interest...

  • Analysis and Interpretation of Profitability Balance sheets and income statements for 3M Company follow. Consolidated Statements...

    Analysis and Interpretation of Profitability Balance sheets and income statements for 3M Company follow. Consolidated Statements of Income Years ended December 31 ($ millions) 2007 2006 2005 Net sales $24,462 $22,923 $21,167 Operating expenses Cost of sales 12,735 11,713 10,408 Selling, general and administrative expenses 5,015 5,066 4,631 Research, development and related expenses 1,368 1,522 1,274 Loss/(gain) from sale of business (849) (1,074) -- Total operating expenses 18,269 17,227 16,313 Operating income 6,193 5,696 4,854 Interest expenses and income Interest...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT