Question

Last year aim arbor corp had $300,000 of assets, $305,000 of sales, $20,000 of net income, and a debt-to-total-assets ratio of 37.5%. The new cfo believes a new computer program will enable it to reduce costs and would thus raise net income to $33,000. Assets, sales, and the debt ratio would not be affected. By how much the cost reduction

Answer 1

Answer:

Explanation:

Sales $325,000 Assets $250,000 Net income $19,000 Debt ratio 67.5% Debt = Debt% Assets = $168,750 Equity = Assets - Debt = $81,250 Profit margin = NI / Sales = 5.85% TATO 1.30 Equity multiplier = Assets / Equity = 3.08 ROE 23.38% PTS: 1 DIF: MEDIUM NAT: Analytic skills LOC: Students will acquire knowledge of financial analysis and cash flows