How Much Will Gamma Inc

question 77

Multiple Choice

How much will Gamma Inc.'s equity holders earn given the following information: total asset turnover is 0.85, profit margin is 0.15, and debt-equity ratio is 0.25?

• A)9.15%
• B)9.75%
• C)10.15%
• D)10.60% Given D/E ratio then leverage ratio:
• 1 + D/E = 1 + 0.25 = 1.25
• ROE = PM x TAT x LR = 0.12 x 0.65 x 1.25

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Definitions:

Self-Fulfilling Prophecy

An anticipation that comes to pass as a result of a positive feedback loop between one's actions and beliefs, making it true either directly or indirectly.

Belief

An acceptance that something exists or is true, especially one without proof.

Fulfillment

The achievement of something desired, promised, or predicted, leading to satisfaction or happiness.

Self-Fulfilling Prophecy

The phenomenon where an individual's expectations about another person or situation cause that expectation to become a reality.