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A firm can increase its Operating Return on Assets (OROA) through: (1) Operation Management: Increasing operating profit margin by efficiently managing costs like marketing expenses, general selling and administrative expenses (2) Asset Management: Increasing total asset turnover by selling inventories and collecting accounts receivables as quickly as possible
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You are a hard-working analyst in the office of financial operations for a manufacturing firm that produces a single product If you have developed the following cost-structure information for this com?
You are a hard-working analyst in the office of financial operations for a manufacturing firm that produces a single product. You have developed the following cost-structure information for this company. All of it pertains to an output level of 10 million units. (1) Using this information , find the break-even point in units of output for the firm. ------------------------------------------------- Return on operating assets = 30% Operating asset turnover = 6 times Operating assets = $20 million Degree of opearting = 4.5 times -------------------------------------------------- (2) Define the term financial leverage. Does the firm use financial leverage if preference shares are present in the capital structure. (3) Define the term operating leverage. What type of effect occurs when the firm uses opearting leverage ?
How can debt can increase the return on equity?
Take a look at a DuPont decomposition of ROE (Profit Margin x Total Asset Turnover x Leverage (defined as Total Assets/Shareholder Equity))...as long as a firm's borrowing cost is lower than the marginal return it earns on the investment in which it invests the funds, ROE would increase along with its leverage.
If a firm has no operating leverage and no financial leverage then a 10 percent increase in sales will have what effect on EPS?
It will inrease by 10%
Has the lowest claim on the assets and cash flow of the firm?
Common shareholders have the lowest claim on the assets of assets of a firm. They have only a residual claim on the assets and are far below the preferred stock classification.
An increase in a firm's expected growth rate would normally cause its required rate of return to do what?
possibly increase, possibly decrease, or possibly remain unchanged
What is the net income when A firm has an Return of Assets of 12 percent sales 1500 total assets of 1275?
Return on asset = 1275 * 12% Return on asset = 153
Explain how return on assets decline given an increase in net profit margin?
If you look at what Return on Assets is comprised of, Net Profit Margin and the Total Asset Turnover, if the firm is having a very slow turnover, the ROA will be declining if the turnover is greater in magnitude to the NPM.
What is its net income if a firm has an Return of total assets of 12 percent sales of 1500 and total assets of 1275?
Net income = total assets * return on total assets. net income = 1275 * 0.12 = 153
What does Asset Management ratios indicate?
Asset management ratios indicate a) how well a firm is using its assets to support sales b) how efficiently a firm is allocating its liabilities c) the return on assets d) the profitability of the firm
What are operating liabilities?
Short-term liabilities resulting from the primary business operations of a firm. They are non-interest bearing and comprise of accounts payable, accrued expenses, and income tax payable. Operating liabilities are deducted from total assets to determine the net operating assets.
Increase in expected growth rate does what to required return rate?
An increase in a firm's expected growth rate would normally cause its required rate of return to
You are a hard-working analyst in the office of financial operations for a manufacturing firm that produces a single product If you have developed the following cost-structure information for this com?
You are a hard-working analyst in the office of financial operations for a manufacturing firm that produces a single product. You have developed the following cost-structure information for this company. All of it pertains to an output level of 10 million units. (1) Using this information , find the break-even point in units of output for the firm. ------------------------------------------------- Return on operating assets = 30% Operating asset turnover = 6 times Operating assets = $20 million Degree of opearting = 4.5 times -------------------------------------------------- (2) Define the term financial leverage. Does the firm use financial leverage if preference shares are present in the capital structure. (3) Define the term operating leverage. What type of effect occurs when the firm uses opearting leverage ?
The risk-free rate of return used to determine a firm's cost of capital will not vary depending upon the financial and operating risk level of the firm?
That is NOT true.
How can debt can increase the return on equity?
Take a look at a DuPont decomposition of ROE (Profit Margin x Total Asset Turnover x Leverage (defined as Total Assets/Shareholder Equity))...as long as a firm's borrowing cost is lower than the marginal return it earns on the investment in which it invests the funds, ROE would increase along with its leverage.
What are operating assets?
Operating Assets are usually items of plant, machinery or equipment used by a business in the generation of its revenue. A crane or a bull dozer would be examples of an operating asset using by a building firm. A fixed asset on the other hand would be the building owned by the construction company that it uses to conduct its business.
If a firm has no operating leverage and no financial leverage then a 10 percent increase in sales will have what effect on EPS?
It will inrease by 10%
What does Wire Fee mean?
Since both sides of the balance sheet (the Assets side and the Liabilities/Owners' Equity side) must have equal totals, an entry showing an increase in an asset must be balanced with an corresponding...Sorry but until Jeff Hardy and Matt Hardy are off the drugs for good and have been clean and sober for at least a year neither will be returning to WWE.A firm can increase its Operating Return on Assets (OROA) through: (1) Operation Management: Increasing operating profit margin by efficiently managing costs like marketing expenses, general selling...There are many transactions that do this. If you receive a payment on account from a customer, you increase Cash and decrease Accounts Receiveable. If you pay for raw materials or merchandise with..
