A Firm with 30% Total Debt Ratio,total Assets of $10

question 62

Essay

A firm with 30% total debt ratio,total assets of $10 million,and an ROE of 14% has been paying out 60% of earnings to shareholders in the form of dividends.Sales are expected to increase by 10% this year,a faster growth rate than usual.Will external funding be required under these conditions? Will the debt-equity ratio remain constant?

Understand the concept and application of financial structure leverage ratios.

Grasp the benefits and risks of financial leverage for a company.

Recognize the importance of customer loyalty and cost control in company strategies.

Learn how to compute and interpret Return on Assets (ROA) considering nonoperating or nonrecurring items.

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Definitions:

Reverse Current Pulse

A method used in electrical engineering to apply a current in the opposite direction to reset or initiate a process.

Momentary Voltage

A temporary spike or drop in electrical voltage, typically of short duration.

Normally-open

Refers to a switch or valve that is in an open state, allowing passage or flow, when not actuated.

Energized-to-run

A condition where equipment needs electrical power applied to start operating.