Last Year Altman Corp

question 84

Multiple Choice

Last year Altman Corp.had $205,000 of assets, $303,500 of sales, $18,250 of net income, and a debt-to-total-assets ratio of 41%.The new CFO believes the firm has excessive fixed assets and inventory that could be sold, enabling it to reduce its total assets to $152,500.Sales, costs, and net income would not be affected, and the firm would maintain the 41% debt ratio.By how much would the reduction in assets improve the ROE?

• A) 4.69%
• B) 4.93%
• C) 5.19%
• D) 5.45%
• E) 5.73%

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Definitions:

Hypothetical Reasoning

The process of applying logical thinking to situations that are often based on suppositions or possibilities, rather than facts.

Deductive Reasoning

A deductive process in which an inference is made based on the harmony of several statements that are commonly believed to be accurate.

Adolescent Egocentrism

A characteristic of adolescent thought involving an increased focus on the self and a belief in the uniqueness of one's own feelings and experiences.

Intuitive Thinking

A cognitive process that enables a person to know something directly without analytic reasoning, bridging the gap between the conscious and nonconscious parts of our mind.