Greg Is Interested in Investing in a Small Company, and He

question 69

Multiple Choice

Greg is interested in investing in a small company, and he thinks Good Buy Co. might be a good investment. He has been given the following information and would like to know the return on stockholder's equity. Assume Good Buy's marginal tax rate is 40%. $\begin{array}{ll}\text { Earning before taxes } & \$ 3 \text { million } \\\text { Net profit margin } & 3.6 \% \\\text { Total liabilities } & \$ 15.0 \text { million } \\\text { Total stockhol der's equity } & \$ 10.0 \text { million }\end{array}$

• A) 12%
• B) 20%
• C) 15%
• D) 18%

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Definitions:

Leisure Time

Free time in which an individual is not working, is not engaged in compulsory activities, and can choose activities for relaxation, enjoyment, or other personal development.

Labor Market

The supply of available workers in relation to available work, and the dynamics of wages, employment, and income.

Households

Entities comprising one or more persons who live together and make joint decisions about consumption and other aspects of their lives; considered a basic unit in economics for analysis of consumption patterns.

Firms

Business entities or organizations that produce goods or provide services with the aim of earning profits.