What is the ROE and Profitability

Assignment Help Finance Basics

Reference no: EM132175096

Question - Consider a small business that started in 2010. The business started with $50 cash provided as an equity investment by its owner. This is a very simple business. They buy and sell everything on a cash basis, so no AP, AR. And all net sales (sales nets of costs) become cash. Now imagine a similar but different business, Assumptions are the same. However in order to sustain the growth rate, the company must buy $400 in equipment every year to sustain growth. It finances this investment in equipment by getting a bank loan. So it owes $400 in year one, 800 in year two, etc. For now assume no interest. Dividend is zero, depreciation is zero. What is the ROE, Profitability, Turn and leverage of the company? How do you interpret this?

Owner decides to extract $30 in dividend every year. What is the ROE, profitability, Turn and Leverage? How do you interpret this?

Reference no: EM132175096

Questions Cloud

Develop a brochure for families composed sexual minorities : Develop a brochure for families composed sexual minorities who may or may not be economically disadvantaged. The purpose of the brochure is to inform.

What role does a companys strategic plan play in the process : What role does a company's strategic plan play in the process of financial management? Does it ever make sense for a profitable company with positive cash flow.

What strategies does the book offer for loved ones : In the first part of the book report, you should give a summary of the book. This summary should contain information about the problem(s) that the book.

What can you imply about yourself from this comparison : Strategic decision-making skills are crucial. Effective strategic decision-making requires a balancing of intuition, rationality, and strategic vision.

What is the ROE and Profitability : Dividend is zero, depreciation is zero. What is the ROE, Profitability, Turn and leverage of the company? How do you interpret this

Identify gaps or tensions within the existing literature : Successful completion of a doctoral dissertation requires significant amounts of independent reading on the research topic. This allows the doctoral learner.

Compute the corporation tax liability : The firm received $40,000 in dividend income from its holdings of other common stocks. Compute the corporation's tax liability

Propose for creative problem-solving : A leader, what methods would you propose for creative problem-solving with team in which to support a more collaborative environment?

Describe scale of measurement of each variable : During this week you will brainstorm a list of research questions you are interested in, which will help you work towards your Week 1 Assignment.

User Account

All Pages