Assume That the Following Financial Ratios Were Computed from the 2017

question 18

Multiple Choice

Assume that the following financial ratios were computed from the 2017 financial statements of Florida Industries:
$\begin{array}{|l|l|}\hline \text { Return on sales (profit margin) } & 0.29 \\\hline \text { Return on assets } & 0.17 \\\hline \text { Common equity leverage } & 0.87 \\\hline \text { Capital structure leverage } & 2.22 \\\hline \text { Asset turnover } & 1.69 \\\hline\end{array}$
If Florida holds its other ratios constant in 2018, but increases its capital structure leverage ratio to 3.20, what will be the 2018 return on equity?

• A)15%
• B)51%
• C)86%
• D)47%

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Definitions:

Divestiture

Selling off parts of the organization to refocus attention on core business areas.

Decentralized

Decentralized refers to the distribution of power, tasks, and decision-making away from a central authority, often to increase efficiency and responsiveness.

Bureaucratic

Describes an organizational structure that is characterized by strict procedures, formalities, and a clear hierarchy of authority.

Matrix

A hierarchical organizational structure that combines two or more lines of authority, such as product and geographical divisions, creating a grid or matrix of responsibilities.