The tasks required to manage the finances of the a small business are comparable to those involved in creating and adhering to a personal budget.
The right response is B.
What is the 50/20/30 guideline for the budget?The simple majority rule is one of the most popular percentage-based budgets. Spending 50% of your money on requirements, 30percentage points on wants, plus 20percent on savings is the general principle. Find out more about the simple majority budgeting rule and decide if it applies to you.
What exactly does "personal budget" mean?Definition of BUDGET 2021: It is the "amount of funds that can be used for, necessary for, or designated to the a particular purpose." A budget is essentially a spending plan that depicts the relationship between income and expenses.
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For 2021, Rahal's Auto Parts estimates bad debt expense at 1% of credit sales. The company reported accounts receivable and an allowance for uncollectible accounts of $91,000 and $3,000, respectively, at December 31, 2020. During 2021, Rahal's credit sales and collections were $413,000 and $417,000, respectively, and $3,690 in accounts receivable were written off. Rahal's final balance in its allowance for uncollectible accounts at December 31, 2021, is:
Answer:
See below
Explanation:
Rahal's final balance in its allowance for uncollectible accounts at December 31, 2021 would be calculated as;
Step 1
= $413,000 × 1%
= $413,000 × 0.01
= $4,130
Step 2
= $3,000 - $3,690
= ($690)
Step 3
= $4,130 + ($690)
= $4,130 - $690
= $3,440
Therefore, Rahal's final balance in its allowance for uncollectible accounts at December 31, 2020 is $3,440
View Policies Current Attempt in Progress Ivanhoe, Inc. had pre-tax accounting income of $1700000 and a tax rate of 20% in 2021, its first year of operations. During 2021 the company had the following transactions:
Received rent from Jane, Co. for 2022 $86000
Municipal bond income $110000
Depreciation for tax purposes in excess of book depreciation $50000
Installment sales profit to be taxed in 2022 $152000
At the end of 2021, which of the following deferred tax accounts and balances exist at December 31, 2021
a) $419,400
b) $471,600
c) $594,000
d) $504,900
Answer:
$17,200
Explanation:
Calculation to determine deferred tax accounts and balances exist at December 31, 2021
Using this formula
Deferred tax accounts=Rent Received* Tax rate
Let plug in the formula
Deferred tax accounts=$86000* 20
Deferred tax accounts=$17,200 Deferred tax asset
Therefore the deferred tax accounts and balances exist at December 31, 2021 will be $17,200
nswer the question on the basis of the following cost data. Output Average Fixed Cost Average Variable Cost 1 $50.00 $100.00 2 25.00 80.00 3 16.67 66.67 4 12.50 65.00 5 10.00 68.00 6 8.37 73.33 7 7.14 80.00 8 6.25 87.50 If the firm closed down in the short run and produced zero units of output, its total cost would be Multiple Choice $0. $50. $150. $100.
Answer:
The correct answer is $50.
Explanation:
When the company produces zero units, the only costs that it would incur will be the fixed costs. We need to determine the total fixed costs:
Total fixed costs= Unitary fixed costs*number of units
Total fixed costs= 50*1= $50
Total fixed costs= 25*2= $50
Total fixed cost= 16.67*3= $50
Total fixed cost= 12.50*4= $50
And so on...
On a unitary basis, the fixed costs decrease with production. On a total basis, it remains constant.
Production= 0
Fixed cost= $50
Q 22.14: The Eccleston Company has the following budgeted sales: January $40,000, February $60,000, and March $50,000. 40% of the sales are for cash and 60% are on credit. For the credit sales, 50% of the amount is collected in the month of sale, and 50% in the next month. The total expected cash receipts during March are
Answer:
Total cash collection March= $53,000
Explanation:
Giving the following information:
Sales:
February $60,000
March $50,000.
Sales in cash= 40%
Sales on account= 60% (50% of the amount is collected in the month of sale, and 50% in the next month)
We need to calculate the cash collection for March:
Cash collection March:
Sales on Cash March= (50,000*0.4)= 20,000
Sales on account March= (50,000*0.6)*0.5= 15,000
Sales on account February= (60,000*0.6)*0.5= 18,000
Total cash collection March= $53,000
If you use a check to pay your monthly rent,
A. the check is not money because it is not part of M1.
B. you have used money because the landlord accepted it as a means of payment.
C. the check is considered money because you received something in return.
D. the check becomes money when it arrives at the landlord's bank.
E. the check is not money because it is just an instruction to your bank to make a payment
Answer:
E
Explanation:
Money is an economic unit that is generally accepted as a medium of exchange in the economy
Functions of money
1. Medium of exchange : money can be used to exchange for goods and services. For example, money serves as a medium of exchange when you pay $20 for your favourite jeans
2. Unit of account : money can be used to value goods and services, For example, $20 is the value of your favourite jeans
3. Store of value : money can retain its value over the long term, this it can be used as a store of value
M1 includes the most liquid from of money. It includes currency, demand deposits and checking account.
A check is not a form of money. It can be defined as a note or an instruction to a bank to make a payment. The payment can either be honoured or not be honoured
Westerly Inc. is a publicly traded company that generated $1000 million in operating income in the most recent year, after taking a depreciation charge of $200 million. The company had capital expenditures of $500 million during the year and its working capital increased by $120 million. If the effective tax rate for the company was 40% for the year, what is the FCFF (Free Cash flow to the Firm) for the most recent year
Answer:
Free cash flow to the firm = $180million
Explanation:
Free cash flow represents the amount that is left to all the providers of capital after the payment of all all operating expenses, working capital and investment in fixed asset expenditures.
It is computed as cash flow made from operation less capital expenditures
For Blur Communications
The Free cash flow
= EBIT(1-T) + depreciation- increase in capital expenditure - increase in working capital
= 1000 × (1-0.4) + 200 - 500 - 120
= $180 million
Free cash flow to the firm = $180million
Tharaldson Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 7.5 ounces $ 8.00 per ounce $ 60.00 Direct labor 0.9 hours $ 19.00 per hour $ 17.10 Variable overhead 0.9 hours $ 8.00 per hour $ 7.20 The company reported the following results concerning this product in June. Originally budgeted output 2,900 units Actual output 2,500 units Raw materials used in production 19,500 ounces Purchases of raw materials 22,400 ounces Actual direct labor-hours 4,700 hours Actual cost of raw materials purchases $ 41,400 Actual direct labor cost $ 12,900 Actual variable overhead cost $ 3,450 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The materials quantity variance for June is: Multiple Choice $1,386 U $6,000 U $6,000 F
Answer:
Direct material quantity variance= $6,000 unfavorable
Explanation:
Giving the following information:
Direct materials 7.5 ounces $ 8.00 per ounce
Actual output 2,500 units
Raw materials used in production 19,500 ounces
To calculate the direct material quantity variance, we need to use the following formula:
Direct material quantity variance= (standard quantity - actual quantity)*standard price
Direct material quantity variance= (7.5*2,500 - 19,500)*8
Direct material quantity variance= $6,000 unfavorable
Journalizing Sales Transactions Enter the following transactions in a general journal. Use a 6% sales tax rate. May 1 Sold merchandise on account to J. Adams, $2,000 plus sales tax. Sale No. 488. 4 Sold merchandise on account to B. Clark, $1,800 plus sales tax. Sale No. 489. 8 Sold merchandise on account to A. Duck, $1,500 plus sales tax. Sale No. 490. 11 Sold merchandise on account to E. Hill, $1,950 plus sales tax. Sale No. 491. If an amount box does not require an entry, leave it blank.
Answer:
See the journal entries below.
Explanation:
The journal entries will look as follows:
Date Description Debit ($) (Credit)
May 1 Accounts receivable - J. Adams 2,120
Sales 2,000
Sales tax payable (6% * $2,000) 120
(To record Sale No. 488.)
May 4 Accounts receivable - B. Clark 1,908
Sales 1,800
Sales tax payable (6% * $1,800) 108
(To record Sale No. 489.)
May 8 Accounts receivable - A. Duck 1,590
Sales 1,500
Sales tax payable (6% * $1,500) 90
(To record Sale No. 490.)
May 11 Accounts receivable - E. Hill 2,067
Sales 1,950
Sales tax payable (6% * $1,950) 117
(To record Sale No. 491.)
A $500,000 bond issue sold at 98. Therefore, the bonds: Multiple Choice Sold at a premium because the stated rate of interest was higher than the yield rate. Sold at a discount because the stated rate of interest was lower than the effective rate. Sold at a discount because the effective interest rate was lower than the face rate. Sold for the $500,000 face amount less $10,000 of accrued interest.
Answer: Sold at a discount because the stated rate of interest was lower than the effective rate.
Explanation:
The stated rate of interest is the coupon rate. This is the interest rate at which the bond will make periodic payments.
The effective rate is the market rate. This is the rate that will discount the bond to the present.
If the effective rate is higher than the stated rate of interest, the coupon payments will be discounted such that the current price of the bond will be less than par.
The above bond had a par of 100 but was issued at 98. It was issued at a discount which means that the effective rate was higher than the stated rate.
Last month when Holiday Creations, Inc., sold 41,000 units, total sales were $282,000, total variable expenses were $214,320, and fixed expenses were $36,900. Required: 1. What is the company’s contribution margin (CM) ratio? 2. What is the estimated change in the company’s net operating income if it can increase total sales by $1,700? (Do not round intermediate calculations.)
Answer:
1. Company’s contribution margin (CM) ratio = 24%
2. Estimated change in the company’s net operating income = $408
Explanation:
1. What is the company’s contribution margin (CM) ratio?
Contribution margin (CM) = Total sales - Total variable expenses = $282,000 - $214,320 = $67,680
Contribution margin (CM) ratio = Contribution margin / Total sales = $67,680 / $282,000 = 0.24, or 24%
2. What is the estimated change in the company’s net operating income if it can increase total sales by $1,700? (Do not round intermediate calculations.)
Estimated change in the company’s net operating income = Increase total in sales * Contribution margin (CM) ratio = $1.700 * 24% = $408
With perfect price discrimination, the marginal revenue curve
A) is equal to the demand curve.
B) is below the demand curve. C) is above the demand curve.
D) is horizontal.
Answer: b
Explanation: Because the monopolist must lower the price on all units in order to sell additional units, marginal revenue is less than price. Because marginal revenue is less than price, the marginal revenue curve will lie below the demand curve.
The SML helps determine the risk-aversion level among investors. The higher the level of risk aversion, the ____________ the slope of the SML. Which of the following statements best describes the shape of the SML if investors were not at all risk averse?
a. The SML would have a positive slope, but the slope would be flatter than it would be if investors were risk.
b. The SML would be a horizontal line.
c. The SML would have a positive slope, but the slope would be steeper than it would be if investors were risk averse.
d. The SML would have a negative slope.
Answer:
a. The SML would have a positive slope, but the slope would be flatter than it would be if investors were at risk.
Explanation:
The SML would have a positive slope, but the slope would be flatter than it would be if investors were risked The SML would be a horizontal line O The SML would have a positive slope, but the slope would be steeper than it would be if investors were risk-averse O The SML would have a negative slope.
1. Describe the effects of combining the words with visual features and body language
The combination of words with visual features and body language makes our speech more interesting and enjoyable.
When speech is combined with body language such as movements, it is capable of turning a conversation that seemed boring into one that is more engaging and memorable.
This would ultimately lead to a more effective and efficient communication. A clear understanding of the body language helps in decoding a person's conversation.
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Novak Company uses the LCNRV method, on an individual-item basis, in pricing its inventory items. The inventory at December 31, 2020, consists of products D, E, F, G, H, and I. Relevant per unit data for these products appear below. Item D Item E Item F Item G Item H Item I Estimated selling price $151 $139 $120 $113 $139 $113 Cost 95 101 101 101 63 45 Cost to complete 38 38 32 44 38 38 Selling costs 13 23 13 25 13 25 Using the LCNRV rule, determine the proper unit value for balance sheet reporting purposes at December 31, 2020, for each of
Answer:
i belive it is d
Explanation:
i took test
Someone help soon please!
Answer:
i'd go with some time in colage with ne degree. ;)
Explanation:
Boss Company reported the following results for the year ended December 31, 2019, its first year of operations: 2019 Income (per books before income taxes) $ 1,500,000 Taxable income 2,500,000 The disparity between book income and taxable income is attributable to a temporary difference which will reverse in 2019. What should Boss record as a net deferred tax asset or liability for the year ended December 31, 2019, assuming that the enacted tax rates in effect are 40% in 2019 and 35% in 2020
Answer:
$350,000 deferred tax asset.
Explanation:
Calculation to determine What should Boss record as a net deferred tax asset or liability for the year ended December 31, 2019,
Using this formula
December 31, 2019 Net deferred tax asset or liability=Taxable income -2019 Income (per books before income taxes)
Let plug in the formula
December 31, 2019 Net deferred tax asset or liability=(2,500,000 - $ 1,500,000) × 35%
December 31, 2019 Net deferred tax asset or liability= $350,000 deferred tax asset.
Therefore what Boss should record as a net deferred tax asset for the year ended December 31, 2019 is $350,000
During 2022, Crane Company entered into the following transactions.
1. Purchased equipment for $310,720 cash.
2. Issued common stock to investors for $138,050 cash.
3. Purchased inventory of $68,620 on account.
Using the following tabular analysis, show the effect of each transaction on the accounting equation. Put explanations for changes to Stockholders' Equity in the right-hand margin.
Assets = Liabilities + Stockholders' Equity
Cash + Inventory + Equipment = Accounts Payable + Common Stock + Retained
Earnings
(1)
(2)
(3)
Answer:
Assets = Liabilities + Stockholders' Equity = $206,670
Explanation:
Note: See the attached excel file for the analysis of the tabular analysis of the effect of each transaction on the accounting equation.
From the attached excel file, we have:
Assets = = – $172,670 + 68,620 + $310,720 = $206,670
Liabilities = $68,620
Stockholders' Equity = $138,050
Liabilities + Stockholders' Equity = $68,620 + $138,050 = $206,670
Therefore, we have:
Assets = Liabilities + Stockholders' Equity = $206,670
Suppose you are the lead underwriter for a start-up company. The company plans to sell 10 million shares at the price of $46 per share. It also provides you an over-allotment option of 1.5 million additional shares. Recent road show estimates demand to be around 20 million shares at $46. There is lots of uncertainty about how the stock will perform after trading starts. Consider the following decisions. 18. Before the trading starts tomorrow, you need to allocate (sell) a number of shares to the institutional investors now at the IPO price. How many shares will you allocate
Answer: 11.5 million shares
Explanation:
The demand for the new shares is 20 million at the IPO price and the company plans to sell 10 million shares only.
Demand therefore exceeds supply so you as the lead underwriter will have to exercise the over-allotment option of 1.5 million additional shares provided to you.
Total shares you allocate will be:
= 10 + 1.5
= 11.5 million shares
Mauro Products distributes a single product, a woven basket whose selling price is $28 per unit and whose variable expense is $23 per unit. The company’s monthly fixed expense is $9,500. Required: 1. Calculate the company’s break-even point in unit sales. 2. Calculate the company’s break-even point in dollar sales. (Do not round intermediate calculations.) 3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales? (Do not round intermediate calculations.)
Answer:
Results are below.
Explanation:
To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 9,500 / (28 - 23)
Break-even point in units= 1,900 units
To calculate the break-even point in dollars, we need to use the following formula:
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 9,500 / (5 / 28)
Break-even point (dollars)= $53,200
Finally, the fixed costs increase to $10,100:
Break-even point in units= 10,100 / 5
Break-even point in units= 2,020 units
Break-even point (dollars)= 10,100 / (5/28)
Break-even point (dollars)= $56,560
The Tangier Company is considering eliminating the following product line: Product AXP Sales $ 49,000 Less variable costs: Raw materials 29,500 Direct labor 8,600 Contribution margin $ 10,900 Less fixed costs: Production costs allocated to products 16,800 Profit (Loss) $ (5,900 ) What amount of cost is avoidable if Tangier outsources production of this product
Answer:
$38,100
Explanation:
For avoidable cost, they are example of relevant cost. When a decision is taken , some costs are incurred in connection with such decision, they are known as avoidable cost.
The direct costs associated with a decision to produce are avoidable costs, which entails that such costs will not be incurred should Tangier company decides not to produce.
Therefore, the avoidable cost of Tangier is
= Raw materials cost + Direct labor cost
= $29,500 + $8,600
= $38,100
The following items appear on the balance sheet of a company with a one-year operating cycle. Identify the proper classification of each item as follows: C if it is a current liability, L if it is a long-term liability, or N if it is not a liability. prepaid insurance bonds payable
Item Classification
1. Current portion of long-term debt.
2. Notes payable (due in 6 to 11 months).
3. Sales taxes payable.
4. Bonus payable (to be paid in 60 days)
5. Warranty liability (6 months of coverage)
6. Prepaid Insurance (6 months of coverage)
7. Notes payable (due in 120 days).
8. Salaries payable.
9. Pension liability (to be fully paid to retired employees in next 11 months)
10. Bonds payable (due in 2 years)
Answer:
L LcnncnlnI think so buh I’d advice u to make it its correct
The estimated unit costs for a company to produce and sell a product at a level of 12,000 units per month are as follows: Cost Item Estimated Unit Cost Direct material $ 32 Direct labor 20 Variable manufacturing overhead 15 Fixed manufacturing overhead 6 Variable selling expenses 3 Fixed selling expenses 4 What are the estimated conversion costs per unit?
Answer:
$41
Explanation:
Conversion costs = Direct labor + Manufacturing overhead
Manufacturing overhead = Variable manufacturing overhead + Fixed manufacturing overhead
Manufacturing overhead = $15 + $6 = $21
Conversion costs = $20 + $21 = $41
Therefore, estimated conversion costs per unit
= $41
The Smoot-Hawley Act, signed into law in 1930, increased U.S. tariffs to an unprecedented level of 53%, causing a sharp decline in U.S. exports. In 1934, however, changes in the U.S. trade policy enabled U.S. manufacturers to resume business with their foreign distributors. Which of the following is the most likely reason for the increase in U.S. exports after these changes?
A. The president received the authority to negotiate bilateral tariff-reduction agreements with foreign governments.
B. The scientific tariff was introduced, which allowed the president to increase tariff levels if foreign production costs were below those of the United States.
C. Congress was given the authority to approve bilateral trade agreements.
Answer:
A. The president received the authority to negotiate bilateral tariff-reduction agreements with foreign governments.
Explanation:
Since in the given situation it is mentioned that in the year 1934 the change in the trade policy enables the manufactured of U.S to restart their business with the foreign distributors so the reason that would increase the U.S exports would be that the president should received the authority in order to negotiate the agreement with the foreign government with respect to the decrease in the bilaterial tariff
Hence, the option A is corrrect
Bentwood Corporation uses the FIFO method in its process costing system. Data concerning the first processing department for the most recent month are listed below:
Beginning work-in-process inventory:
Units in beginning work-in-process inventory 1,700
Materials costs $32,300
Conversion costs $18,700
Percent complete with respect to materials 70%
Percent complete with respect to conversion 25%
Units started into production during the month 8,900
Units transferred to the next department during the month 7,700
Materials costs added during the month $154,600
Conversion costs added during the month $253,900
Ending work-in-process inventory:
Units in ending work-in-process inventory 2,900
Percent complete with respect to materials 80%
Percent complete with respect to conversion 35%
The cost per equivalent unit for conversion costs for the first department for the month is closest to:____.
a. $29.33.
b. $29.00.
c. $31.78.
d. $35.51.
Answer:
$31.28
Explanation:
Calculation to determine what The cost per equivalent unit for conversion costs for the first department for the month is closest to:
First step is to calculate the Total Conversion Cost
Total Conversion Cost=$253,900+$18,700
Total Conversion Cost=$$272,600
Second step is to calculate the Equivalent Units
Equivalent Units =( 7,700 x 100%) + (1,700 + 8,900 - 7,700 ×35%)
Equivalent Units =( 7,700 x 100%) + (2,900 x 35 %)
Equivalent Units =7,700+1,015
Equivalent Units = 8,715 units
Now let calculate the Cost per Equivalent Units using this formula
Cost per Equivalent Unit = Total Cost ÷ Total Equivalent Units
Cost per Equivalent Unit = $272,600 ÷ 8,715 units
Cost per Equivalent Unit = $31.28
Therefore The cost per equivalent unit for conversion costs for the first department for the month is closest to:$31.28
Effective managers should Question 26 options: convince employees to engage in relationship conflict rather than the other forms of conflict. minimize the relationship conflicts that exist in the organization. remove all forms of conflict from the organization because it saps productivity. increase the amount of conflict among employees.
Answer: remove all forms of conflict from the organization because it saps productivity.
Explanation:
Effective managers are the managers who ensures that the goals of an organization are achieved as they bring out the best in the employees. They motivate employees and in such case, employees trust them.
Effective managers remove all forms of conflict in an organization. They ensure that the employees in an organization gets along well and there unity among them because this is vital to enhance productivity and improve organizational growth.
When George and Arthurine Renfro decided to start a family business in 1990 and market chowchow, a southern regional food, they had to determine how they would price the chowchow by examining the demand for the product (would people rather eat home-made or store-bought), the cost of getting the jars for bottling the chowchow, and how much it would cost to distribute the product to area stores. In other words, the Renfros had to begin the development of their pricing strategy by:
Answer:
identifying pricing constraints.
Explanation:
From the question we are informed about George and Arthurine Renfro decided who decided to start a family business in 1990 and market chowchow, a southern regional food, they had to determine how they would price the chowchow by examining the demand for the product (would people rather eat home-made or store-bought), the cost of getting the jars for bottling the chowchow, and how much it would cost to distribute the product to area stores. In other words, in this case, the Renfros had to begin the development of their pricing strategy by identifying pricing constraints. .
Pricing constraints can be regarded as
factors which brings about limit of latitude of prices which a company may set.
A bank has $400 in checkable deposits, $800 in savings deposits, $700 in time deposits, $900 in loans to businesses, $300 in outstanding credit card balances, $500 in government securities, $10 in currency in its vault, and $20 in deposits at the Fed. The bank's deposits that are part of M1 are equal to
Answer: $400
Explanation:
M1 money supply simply refers to the monies which are liquid like the checkable deposits, traveler's checks, and the coins and currencies that are in circulation.
Therefore, based on the information given in the question, the bank's deposits that are part of M1 will be the $400 in checkable deposit.
Jackson Co. (lessee) entered into a 10-year operating lease on January 1, Year 1. Annual lease payments are $30,000, and payments begin December 31, Year 1. The lessee knows that the rate implicit in the lease is 8%, and its incremental borrowing rate is 7%. The useful life of the asset is 20 years. How should Jackson Co. account for the lease in the income statement
Answer: B. lease payments are allocated over the full lease term on a straight line basis and reported as lease expense in the income statement
Explanation:
The options given include:
A. Interest expense for the lease liability and amortization expense for the right to use asset must be reported separately in the income statement.
B. lease payments are allocated over the full lease term on a straight line basis and reported as lease expense in the income statement
C. the incremental borrowing rate is used to calculate the annual interest expense on lease liability
D. interest expense for the lease liability is recognized in full on the commencement dates of lease.
Jackson Co. should account for the lease in the income statement as "lease payments are allocated over the full lease term on a straight line basis and reported as lease expense in the income statement".
Based on the information given, the correct option is B.
Blossom Company has the following inventory data: July 1 Beginning inventory 35 units at $22 $770 7 Purchases 124 units at $24 2976 22 Purchases 18 units at $26 468 $4214 A physical count of merchandise inventory on July 30 reveals that there are 57 units on hand. Using the LIFO inventory method, the amount allocated to ending inventory for July is
Answer:
Ending invenory= $1,298
Explanation:
Giving the following information:
July 1 Beginning inventory 35 units at $22 $770
July 7 Purchases 124 units at $24 $2,976
July 22 Purchases 18 units at $26 $468
A physical count of merchandise inventory on July 30 reveals that there are 57 units on hand.
To calculate the ending inventory using the LIFO (last-in, first-out) method, we need to use the cost of the firsts units incorporated into inventory:
Ending inventory= 35*22 + 22*24
Ending invenory= $1,298
Two companies, A and B, both have $1 million in assets, earnings before interest and taxes (EBIT) of $160,000, and the same tax rate. Company A is all equity financed, and Company B is 50% debt financed and 50% equity financed. If Company B's pretax cost of debt is 8%, then Company A will have a ROA that is _____ and a ROE that is _____ than Company B's. a. Option D b. Option C c. Option B d. Option A
Answer: higher; lower
Explanation:
EBIT for A = 160,000
Equity of A = 1,000,000
ROA of A = 160,000/1,000,000 = 0.16 = 16%
ROE of A = 160,000/1,000,000 = 0.16 = 16%
EBIT for B = 160000 - (1000000 × 50% × 8%) = 120000
Equity of B = 1000000 × 50% = 500,000
ROA of B = 120000/1000000 = 0.12 = 12%
ROE of B = 120000/500000 = 0.24 = 24%
From the above, we can see that Company A has a higher ROA but had a lesser ROE THAN B