Financial Management - Study Mode

[#926] Return on assets = 5.5%, Total assets Rs 3,000 and common equity Rs 1,050 then return on equity would be
Correct Answer

(B) 15.71%

Explanation

Solution: Return on assets (ROA) shows how efficiently a company uses its assets to generate earnings. It's calculated as Net Income divided by Total Assets. Return on equity (ROE) shows how well a company uses shareholder investments to generate profit. It's calculated as Net Income divided by Shareholder Equity (Common Equity in this case). We are given ROA = 5.5%, Total Assets = Rs 3,000, and Common Equity = Rs 1,050. First, let's find the Net Income using the ROA formula: ROA = Net Income / Total Assets 0.055 = Net Income / 3000 Net Income = 0.055 * 3000 = Rs 165 Now, we can calculate the ROE using the Net Income we just found: ROE = Net Income / Common Equity ROE = 165 / 1050 ROE = 0.1571 or 15.71% Therefore, the correct answer is Option B: 15.71% . The other options are incorrect calculations or units.

[#927] If profit margin = 4.5% and total assets turnover = 1.8% then return on assets DuPont equation would be
Correct Answer

(B) 8.10%

Explanation

Solution: Return on assets = Total assets turnover × Profit margin = 1.8% × 4.5% = 8.10%

[#928] High price to earning ratio shows company's
Correct Answer

(C) high growth prospect

Explanation

Solution: High price to earning ratio shows company's high growth prospect. The price-to-earnings ratio indicates the dollar amount an investor can expect to invest in a company in order to receive one dollar of that company's earnings.

[#929] Return on assets = 6.7% and equity multiplier = 2.5% then return on equity will be
Correct Answer

(A) 16.75%

Explanation

Solution: Return on equity = Return on assets × Equity multiplier = 6.7% × 2.5% = 16.75%

[#930] The amount of current assets that varies with seasonal requirements is referred to as __________ working capital.
Correct Answer

(C) Temporary

Explanation

Solution: The amount of current assets that varies with seasonal requirements is referred to as Temporary working capital. Temporary working capital (TWC) is the temporary fluctuation of networking capital over and above the permanent working capital.