Last Year Rosenberg Corp

question 65

Multiple Choice

Last year Rosenberg Corp.had $195,000 of assets, $18,775 of net income, and a debt-to-total-assets ratio of 32%.Now suppose the new CFO convinces the president to increase the debt ratio to 48%.Sales and total assets will not be affected, but interest expenses would increase.However, the CFO believes that better cost controls would be sufficient to offset the higher interest expense and thus keep net income unchanged.By how much would the change in the capital structure improve the ROE?

• A) 4.36%
• B) 4.57%
• C) 4.80%
• D) 5.04%
• E) 5.30%

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Definitions:

Employee Involvement

The degree to which employees are allowed or encouraged to contribute ideas and participate in decisions within their workplace.

Production Line Approach

A method of manufacturing in which products are assembled progressively from components to finished goods while moving continuously along a conveyor or line.

Dynamic

Characterized by continuous change, activity, or progress, often used to describe systems, processes, or personalities.

Micromanagement

A management style where a manager closely observes or controls the work of subordinates or employees.