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Reading 41: Financial Analysis Techniques - LOS f ~ Q6-9

6.If a firm has a profit margin of 0.05, an asset turnover of 1.465, and an equity multiplier of 1.66, what is the firm's ROE?

A)   3.18%.

B)   5.66%.

C)   5.87%.

D)   12.16%.

 

7.What is a company’s equity if their return on equity (ROE) is 12 percent, and their net income is 10 million?

A)   1,200,000.

B)   83,333,333.

C)   12,000,000.

D)   120,000,000.

 

8.Given the following information about a firm what is its return on equity (ROE)?

§ An asset turnover of 1.2

§ An after tax profit margin of 10%

§ A financial leverage multiplier of 1.5

A)   0.09.

B)   0.18.

C)   0.12.

D)   0.10.

 

9.Summit Co. has provided the following information for its most recent reporting period:

  

Beginning Figures

Ending Figures

Average Figures

Sales

  

$ 5,000,000

  

EBIT

  

$ 800,000

  

Interest Expense

  

$ 160,000

  

Taxes

  

$ 256,000

  

Assets

$ 3,500,000

$ 4,000,000

$ 3,750,000

Equity

$ 1,700,000

$ 2,000,000

$ 1,850,000

What is Summit Co.’s total asset turnover and return on equity?

 

Total Asset Turnover

Return on Equity

 

A)                           1.25                            20.8%

B)                           1.33                            20.8%

C)                           1.25                            15.8%

D)                           1.33                            15.8%

答案和详解如下:

6.If a firm has a profit margin of 0.05, an asset turnover of 1.465, and an equity multiplier of 1.66, what is the firm's ROE?

A)   3.18%.

B)   5.66%.

C)   5.87%.

D)   12.16%.

The correct answer was D)

One of the many ways to express ROE = profit margin * asset turnover * equity multiplier = ROE = (0.05)(1.465)(1.66) = 0.1216

 

7.What is a company’s equity if their return on equity (ROE) is 12 percent, and their net income is 10 million?

A)   1,200,000.

B)   83,333,333.

C)   12,000,000.

D)   120,000,000.

The correct answer was B)

One of the many ways ROE can be expressed is: ROE = Net Income/Equity

0.12 = $10,000,000/Equity

Equity = $10,000,000/0.12

= $83,333,333

 

8.Given the following information about a firm what is its return on equity (ROE)?

§ An asset turnover of 1.2

§ An after tax profit margin of 10%

§ A financial leverage multiplier of 1.5

A)   0.09.

B)   0.18.

C)   0.12.

D)   0.10.

The correct answer was B)

ROE = (EAT/S)(S/A)(A/EQ)
ROE = (.1)(1.2)(1.5) = .18

 

9.Summit Co. has provided the following information for its most recent reporting period:

  

Beginning Figures

Ending Figures

Average Figures

Sales

  

$ 5,000,000

  

EBIT

  

$ 800,000

  

Interest Expense

  

$ 160,000

  

Taxes

  

$ 256,000

  

Assets

$ 3,500,000

$ 4,000,000

$ 3,750,000

Equity

$ 1,700,000

$ 2,000,000

$ 1,850,000

What is Summit Co.’s total asset turnover and return on equity?

 

Total Asset Turnover

Return on Equity

 

A)                           1.25                             20.8%

B)                           1.33                             20.8%

C)                           1.25                             15.8%

D)                           1.33                             15.8%

The correct answer was B)

Total asset turnover = sales/average assets = 5,000,000/3,750,000 = 1.33

Return on equity = net income/average equity
Net income = EBIT - interest - taxes
= 800,000 - 160,000 - 256,000 = 384,000
ROE = 384,000/1,850,000 = 20.8%

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