thank you? 6. What does the ROA measure? (20 points) A. measures the overall ret
ID: 2636316 • Letter: T
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thank you?
6. What does the ROA measure? (20 points) A. measures the overall return on the finn?s assets, inclusive of leverage and taxes B. measures the overall return on the firm? s assets, exclusive of leverage and taxes C. measures the overall return on the firm?s equity, inclusive of leverage and taxes . D. measures the overall return on the firm?s equity, exclusive of leverage and taxes . Which of the following can measure the default risk of a firm? (20 points) . A. Profit Margin . B. ROA . C. Debt Ratio . D. Market-to-book Ratio Profitability and Asset Management Ratios You are thinking of investing in Tikki?s Torches, Inc. You have only the following information on the firm at year-end 2008: net income =$500,000, total debt= $12 million, debt ratio =40%. What is Tikki?s ROE for 2008? (30 points) 4.== A. 1.67% B. 2.78% C. 4.17% D. 10.42%Explanation / Answer
6. A)Return on assets (ROA) measures the overall return on the firm's assets, inclusive of financial leverage and taxes
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7. c) Debt Ratio
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8. Total Equity = 12million/0.4
=$30 million
ROE = 500000/30000000
=1.67%
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