Business Finance?
I'm studying two equal companies, but next to different working possessions investments.
Can someone show me how to integer out the ROE's for the two companies and let somebody know me which one earn the most for its
OWNERS. Use the information below
Both companies have
$1,200,000 contained by fixed assets
pay envelope 10% contained by interest expense
settle taxes of 35%
and enjoy EBIT's of 12% of Assets
Sales for both are $2,000,000
the Debt to Assets ratio is 60%
Company A have established to invest 40% of sale contained by Current Assets
Company B have arranged to invest 55% of sale surrounded by Current Assets
Answers:
Intuitively, since the leading difference is that A invested smaller amount within current assets, we know A have smaller quantity assets and also smaller amount equity (equity = asset - debt = assets * (1-60%)). So since both enjoy like income, A have a high ROE.
The details:
ROE = return/equity = lattice profit / assets - liabilities
network profit = EBIT - interest - taxes
EBIT = earn up to that time interest and taxes
EBIT = $1.2m * 12% = $144k
interest = $1.2m * 10% = $120k
EBT = $144k-120k=24k
taxes = 24k*35%= $8.4
network profit = $15600
assets = current assets + fixed assets
A current assets = 40% sale = (assumed) 40% EBIT = $57.6k
B current assets = 55% sale = (assumed) 55% EBIT = $79.2k
A assets = $57.6k + $1.2m = $1.2576m
B assets = $79.2k + $1.2m = $1.2792m
liability = (assumed) debt = assets * 60%
A liability = $1.2576m * 60% = $754.56k
B liability = $1.2792m * 60% = $767.52k
ROE = $15600 / assets-liabilities
A ROE = $15600 /($1.2576m-$754.56k)
=$15600/503,040=3.101%
B ROE = $15600 /($1.2792m-$767.52k)
=$15600/511,680=3.049%
to bring back to ROE. i entail the lattice income and shareholder's equity on both companies.
web income divided by shareholder's equity = ROE
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Can someone show me how to integer out the ROE's for the two companies and let somebody know me which one earn the most for its
OWNERS. Use the information below
Both companies have
$1,200,000 contained by fixed assets
pay envelope 10% contained by interest expense
settle taxes of 35%
and enjoy EBIT's of 12% of Assets
Sales for both are $2,000,000
the Debt to Assets ratio is 60%
Company A have established to invest 40% of sale contained by Current Assets
Company B have arranged to invest 55% of sale surrounded by Current Assets
Answers:
Intuitively, since the leading difference is that A invested smaller amount within current assets, we know A have smaller quantity assets and also smaller amount equity (equity = asset - debt = assets * (1-60%)). So since both enjoy like income, A have a high ROE.
The details:
ROE = return/equity = lattice profit / assets - liabilities
network profit = EBIT - interest - taxes
EBIT = earn up to that time interest and taxes
EBIT = $1.2m * 12% = $144k
interest = $1.2m * 10% = $120k
EBT = $144k-120k=24k
taxes = 24k*35%= $8.4
network profit = $15600
assets = current assets + fixed assets
A current assets = 40% sale = (assumed) 40% EBIT = $57.6k
B current assets = 55% sale = (assumed) 55% EBIT = $79.2k
A assets = $57.6k + $1.2m = $1.2576m
B assets = $79.2k + $1.2m = $1.2792m
liability = (assumed) debt = assets * 60%
A liability = $1.2576m * 60% = $754.56k
B liability = $1.2792m * 60% = $767.52k
ROE = $15600 / assets-liabilities
A ROE = $15600 /($1.2576m-$754.56k)
=$15600/503,040=3.101%
B ROE = $15600 /($1.2792m-$767.52k)
=$15600/511,680=3.049%
to bring back to ROE. i entail the lattice income and shareholder's equity on both companies.
web income divided by shareholder's equity = ROE