Chapter 9 The Elk head management should consider the risk of not

subject Type Homework Help
subject Pages 8
subject Words 930
subject Authors Carl S. Warren

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P9–4
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P9–4, Concluded
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P9–5
1. a.
20%
25%
Return on Total Assets = AssetsTotal Average
ExpenseInterest +IncomeNet
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P9–5, Continued
1. b.
Return on Stockholders’ Equity = Equity rs'Stockholde Total Average
IncomeNet
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P9–5, Continued
1. c.
6.0
7.0
8.0
Times Interest
Earned = Expense Interest
Expense Interest+ExpenseTax Income+Income Net
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P9–5, Concluded
2. The return on total assets and the return on stockholders’ equity are above
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CASES
Case 9–1
This position does not allow the shareholders to take advantage of leverage. As a
result, the return on shareholders’ equity cannot be improved by using debt. In
Case 9–2
Kim is concerned about the inventory and accounts receivable levels because
she must determine their value. Inventory that cannot be sold (or must be sold at
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Case 9–3
APPLE AND BEST BUY
Common-Sized Statements
Apple Best Buy
Sales ........................................................... 100.0% 100.0%
The common-sized analysis indicates Apple and Best Buy are very different
The gross profit for Apple was 40.1% of sales. In contrast, Best Buy had a gross

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