Last Year Swensen Corp

question 88

Multiple Choice

Last year Swensen Corp.had sales of $303,225, operating costs of $267,500, and year-end assets of $195,000.The debt-to-total-assets ratio was 27%, the interest rate on the debt was 8.2%, and the firm's tax rate was 25%.The new CFO wants to see how the ROE would have been affected if the firm had used a 45% debt ratio.Assume that sales and total assets would not be affected, and that the interest rate and tax rate would both remain constant.By how much would the ROE change in response to the change in the capital structure?

• A) 2.48%
• B) 2.76%
• C) 3.06%
• D) 3.40%
• E) 3.74%

Understand how to calculate and interpret the inventory turnover ratio.

Comprehend various financial ratios that affect and reflect the return on common shareholders' equity.

Calculate specific financial ratios using provided company information.

Identify actions that influence a company's profit margin.

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Definitions:

Team Skills

Abilities and competencies that enable an individual to effectively collaborate and work within a group setting.

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Documents published by the United Nations Educational, Scientific and Cultural Organization, focusing on global issues in education, science, culture, and communication.

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Business Climate

The overall economic and regulatory environment that affects the operations and growth potential of companies.