Yanky Doodle Dandy Cartoon Creators, Inc. earned $5,000 in operating profits (revenue less operating costs) last year. It paid $500 in interest and spent $600 on new equipment for a very modest expansion. Its tax rate was 20% and it maintains a dividend payout ratio of 75%. This year it expects to achieve exactly the same results except the tax rate will be lower. Which of the following will increase this year from last?
a) coverage ratio
b) (after-tax) profit margin
c) return on equity
d) none
Answer:
b) (after-tax) profit margin
c) return on equity
Business
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If an American firm has a subsidiary in the EU and the value of the euro depreciates rapidly against the value of the dollar over a year, you would see a reduction in the dollar value of the euro profit made by the European subsidiary. This would result in _____ translation exposure.
Fill in the blank(s) with the appropriate word(s).
Business
Mr. and Mrs. Jones sold their home to a church but retained the right to occupy the property as long as they lived. The interest of the church is that of a:
a. life estate b. remainder estate c. trustee d. reversion estate
Business