Assume that the following financial ratios are calculated for Royals Corporation in 2017: Asset turnover ...........................................0.625 Common
Question:
Assume that the following financial ratios are calculated for Royals Corporation in 2017:
Asset turnover ...........................................0.625
Common equity leverage .........................0.685
Capital structure leverage ..........................2.50
Return on assets .......................................9.50%
Return on sales (profit margin) .............15.20%
a. What was the return on equity for Royals Corporation in 2017?
b. If Royals Corporation keeps all of its other ratios constant in 2018 but increases its capital structure leverage ratio to 2.75, what will be the 2018 return on equity?
c. If Royals Corporation keeps all of its other ratios constant in 2018 but increases its profit margin to 16 percent, what will be the 2018 return on equity?
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Step by Step Answer:
a ROE ROA Common Equity Leverage Capital Structure Leverage 2017 ROE 095 x 0685 x 250 163 ...View the full answer
