Reference no: EM132493935

Questions -

Q1. A fire has destroyed many of the financial records of R. Son & Co. You are assigned to put together a financial report. You have found the return on equity to be 12% and the debt ratio was 0.40. What was the return on assets?

a. 5.35%

b. 8.4%

C. 6.60%

d. 7.20%

Q2. Deb & Co. has a debt ratio of 0.50, a total assets turnover of 0.25, and a profit margin of 10%. The president is unhappy with the current return on equity, and he thinks it could be doubled. This could be accomplished (1) by increasing the profit margin and (1) by increasing debt utilization. Total assets turnover will not change. What new debt ratio, along with the 14% profit margin, is required to double the return on equity?

a. 0.75

b. 0.70

C. 0.65

d. 0.55