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Klein Cosmetics has a profit margin of 5.0 %, a total assets turnover ratio of 1.5 times, a zero debt ratio and therefore an equity
Klein Cosmetics has a profit margin of 5.0 %, a total assets turnover ratio of 1.5 times, a zero debt ratio and therefore an equity multiplier of 1.0, and an ROE of 7.5%. The CFO recommends that the firm borrow money, use it to buy back stock, and raise the debt ratio to 50% and the equity multiplier to 2.0. She thinks that operations would not be affected, but interest on the new debt would lower the profit margin to 4.5%. This would probably be a good move, as it would increase the ROE from 7.5% to 13.5%. Klein Kosmetik mempunyai margin keuntungan sebanyak 5.0%, nisbah pusing ganti jumlah aset sebanyak 1.5 kali, nisbah hutang sifar dan oleh itu pengganda ekuiti 1.0, dan ROE sebanyak 7.5%. CFO mengesyorkan bahawa firma itu meminjam wang, untuk digukan bagi membeli balik saham, dan meningkatkan nisbah hutang kepada 50% dan pengganda ekuiti kepada 2.0. Beliau berpendapat bahawa operasi tidak akan terjejas, tetapi faedah ke atas hutang yang baru akan mengurangkan margin keuntungan kepada 4.5%. Ini mungkin akan menjadi satu langkah yang baik, kerana ia akan meningkatkan ROE daripada 7.5% kepada 13.5%
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