A Company Has Announced $50,000 in Net Income After Paying

question 78

Essay

A company has announced $50,000 in net income after paying taxes of $26,000 and interest of $20,000.It intends to pay $17,000 of net income as dividends.Its assets have averaged $600,000 over the past year,during which its total debt ratio has averaged 40%.Given this information,answer the following about the company's profitability:
a.Calculate the ROA and ROE.
b.Calculate the payout and plowback ratios.
c.What effect will the plowback have on the company's growth in equity?

---

Definitions:

Authoritative

Being final or conclusive; a position of power where the holder is able to enforce rules or directives.

Policies

Formal guidelines or rules that govern actions and decision-making within an organization.

Grapevines

Informal channels of communication within an organization, often based on rumor or gossip, which can spread information quickly but sometimes inaccurately.

Transfer Information

The process of conveying data, facts, or knowledge from one person, place, or entity to another.