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Last year Bell Corp. had $200,000 of assets, $300,000 of sales, $20,000 of net income, and a debt ratio of 40 percent. The new CFO
Last year Bell Corp. had $200,000 of assets, $300,000 of sales, $20,000 of net income, and a debt ratio of 40 percent. The new CFO believes the firm has excessive fixed assets and inventory that could be sold, reducing its total assets to $150,000. Sales, costs, and net income would not be affected, and the firm would maintain the 40 percent debt ratio. By how much would the reduction in assets improve ROE?
- A. 5.86 percent
- B. 4.96 percent
- C. 4.66 percent
- D. 5.56 percent
- E. 5.26 percent
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