Question

Leverage Sensitivity Exercise Profits from Operations down 40% Total Debt $ 14.00 $ 18.00 $ 22.00...

Leverage Sensitivity Exercise
Profits from Operations down 40%
Total Debt $ 14.00 $ 18.00 $ 22.00 $ 26.00
Total Equity $ 59.00 $ 55.00 $ 51.00 $ 47.00
Profit From Operations $ 14.00 $ 14.00 $ 14.00 $ 14.00
Interest Expense (6% of Debt)
Net Profit Before Taxes
Taxes (40%)
Net Profit After Taxes
Debt to Equity Ratio
Return on Equity

Homework Answers

Answer #1

Answer:-

Particulars Amount in ($)
Total Debt (a) 14 18 22 26
Total Equity (b) 59 55 51 47
Profit from Operations (c ) 14 14 14 14
Interest Expense (d) 6% of (a) 0.84 1.08 1.32 1.56
Net profit Before Taxes (e ) = (c ) - (d) 13.16 12.92 12.68 12.44
Tax (f) = 40% of (e) 5.26 5.17 5.07 4.98
Net profit after taxes (g ) = (e ) - (f) 7.90 7.75 7.61 7.46
Debt to Equity Ratio = (a) / (b) 23.73 32.73 43.14 55.32
Return on Equity = ( g) / (b) 13.38 14.09 14.92 15.88
Know the 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
Similar Questions
Return Ratios and Leverage The following selected data are taken from the financial statements of Cedar...
Return Ratios and Leverage The following selected data are taken from the financial statements of Cedar Industries: Sales revenue $654,000 Cost of goods sold 392,000 Gross profit $262,000 Selling and administrative expense 100,000 Operating income $162,000 Interest expense 50,000 Income before tax $112,000 Income tax expense (40%) 44,800 Net income $67,200 Accounts payable $45,000 Accrued liabilities 70,000 Income taxes payable 10,000 Interest payable 25,000 Short-term loans payable 150,000 Total current liabilities $300,000 Long-term bonds payable $500,000 Preferred stock, 10%, $100...
Review the financial statements for Jones Inc. and the comparative financial ratios for the year-end review....
Review the financial statements for Jones Inc. and the comparative financial ratios for the year-end review. Enter your calculations and written analysis directly into the template, and show or explain your work where appropriate. Problem 1. Calculate the firm's 2015 financial ratios for liquidity, activity (asset management), leverage (debt), and profitability. Problem 2. Analyze the firm's performance from both time-series and cross-sectional points of view using the key financial ratios provided in the template. Problems 1 and 2 BALANCE SHEET...
The balance sheet and income statement for the A. Thiel Mfg. Company are as follows: Balance...
The balance sheet and income statement for the A. Thiel Mfg. Company are as follows: Balance Sheet ($000) Cash $ 500 Accounts receivable 2,000 Inventories 1,000 Current assets $3,500 Net fixed assets 4,500 Total assets $8,000 Accounts payable $1,100 Accrued expenses 600 Short-term notes payable 300 Current liabilities $2,000 Long-term debt 2,000 Owners’ equity 4,000 Total liabilities and owners’ equity $8,000 Income Statement ($000) Sales (all credit) $8,000 Cost of goods sold (3,300) Gross profit $4,700 Operating expenses (includes $500...
Return Ratios and Leverage The following selected data are taken from the financial statements of Redwood...
Return Ratios and Leverage The following selected data are taken from the financial statements of Redwood Enterprises: Sales revenue $649,000 Cost of goods sold 363,000 Gross profit $286,000 Selling and administrative expense 100,000 Operating income $186,000 Interest expense 50,000 Income before tax $136,000 Income tax expense (40%) 54,400 Net income $81,600 Accounts payable $45,000 Accrued liabilities 70,000 Income taxes payable 10,000 Interest payable 25,000 Short-term loans payable 150,000 Total current liabilities $300,000 Long-term bonds payable $500,000 Preferred stock, 10%, $100...
Return Ratios and Leverage The following selected data are taken from the financial statements of Cedar...
Return Ratios and Leverage The following selected data are taken from the financial statements of Cedar Industries: Sales revenue $642,000 Cost of goods sold 365,000 Gross profit $277,000 Selling and administrative expense 100,000 Operating income $177,000 Interest expense 50,000 Income before tax $127,000 Income tax expense (40%) 50,800 Net income $76,200 Accounts payable $45,000 Accrued liabilities 70,000 Income taxes payable 10,000 Interest payable 25,000 Short-term loans payable 150,000 Total current liabilities $300,000 Long-term bonds payable $500,000 Preferred stock, 10%, $100...
A firm has been experiencing low profitability in recent years. Perform an analysis of the firm's...
A firm has been experiencing low profitability in recent years. Perform an analysis of the firm's financial position using the DuPont equation. The firm has no lease payments but has a $1 million sinking fund payment on its debt. The most recent industry average ratios and the firm's financial statements are as follows: Industry Average Ratios Current ratio 2 × Fixed assets turnover 6 × Debt-to-capital ratio 17 % Total assets turnover 3 × Times interest earned 5 × Profit...
Exercise 13-4 Financial Ratios for Debt Management [LO13-4] Comparative financial statements for Weller Corporation, a merchandising...
Exercise 13-4 Financial Ratios for Debt Management [LO13-4] Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 500,000 shares of common stock were outstanding. The interest rate on the bonds, which were sold at their face value, was 10%. The income tax rate was 40% and the dividend per share of common stock was $0.40 this year....
Use the following information from Cersie Company to create the Cash Flow from Operations Section of...
Use the following information from Cersie Company to create the Cash Flow from Operations Section of the Cash Flow Statement using the indirect method. Note: You may not have sufficient information to prepare a complete cash flow statement but you do have enough to do just the Cash Flow from Operations section. Cersei Company Income Statement For the Year Ended December 31, 2019 Net Sales Revenue $325,000 Cost of Goods Sold 222,000 Gross Profit $103,000 Operating Expenses: Selling Expenses Commission...
Under Armour Inc. Consolidated Statement of Income Dec. 31, 2015 Net Revenues 3,963,313 Cost of goods...
Under Armour Inc. Consolidated Statement of Income Dec. 31, 2015 Net Revenues 3,963,313 Cost of goods sold 2,057,766 Gross profit 1,905,547 Selling, general and administrative expenses 1,497,000 Income from operations 408,547 Interest expense, net -14,628 Other expense, net -7,234 Income before income taxes 386,685 Provision for income taxes 154,112 Net income 232,573 Under Armour Inc. Consolidated Balance Sheet Dec. 31, 2015 Dec. 31, 2014 Assets Cash and cash equivalents 129,852 593,175 Accounts receivable, net 433,638 279,835 Inventories 783,031 536,714 Prepaid...
Please Calculate the following ratios: Asset turnover Operating profit margin Long-term debt to equity ratio Current...
Please Calculate the following ratios: Asset turnover Operating profit margin Long-term debt to equity ratio Current ratio The Home Depot, Inc. Income Statement All numbers in thousands Revenue 1/29/17 1/31/16 Total Revenue 94,595,000 88,519,000 Cost of Revenue 62,282,000 58,254,000 Gross Profit 32,313,000 30,265,000 Operating Expenses Research Development - - Selling General and Administrative 17,132,000 16,801,000 Non Recurring - - Others 1,754,000 1,690,000 Total Operating Expenses - - Operating Income or Loss 13,427,000 11,774,000 Income from Continuing Operations Total Other Income/Expenses...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT