Red Spark Incorporated is interested in assessing the following scenarios on its indicators of profitability. Solve each scenario independently. a. Red Spark has taken significant steps to decrease expenses and expects its net income to increase by $8 million to $68 million. If its profit margin is 5.0%, what will the profit margin be after considering the decreased expenses? b. Red Spark has taken significant steps to decrease expenses and expects its net income to increase by $8 million to $68 million. If its average total assets are $494 million, what will its return on assets be?
Red Spark Incorporated is interested in assessing the following scenarios on its indicators of profitability. Solve each scenario independently. a. Red Spark has taken significant steps to decrease expenses and expects its net income to increase by $8 million to $68 million. If its profit margin is 5.0%, what will the profit margin be after considering the decreased expenses? b. Red Spark has taken significant steps to decrease expenses and expects its net income to increase by $8 million to $68 million. If its average total assets are $494 million, what will its return on assets be?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter22: Providing And Obtaining Credit
Section: Chapter Questions
Problem 15MC: Suppose the firm makes the change but its competitors react by making similar changes to their own...
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Question
Red Spark
Incorporated is interested in assessing the following scenarios on its indicators of profitability. Solve each scenario independently.
a.
|
Red Spark
has taken significant steps to decrease expenses and expects its net income to increase by
$8 million to $68 million. If its profit margin is 5.0%, what will the profit margin be after considering the decreased expenses?
|
b.
|
Red Spark has taken significant steps to decrease expenses and expects its net income to increase by $8 million to $68 million. If its average total assets are $494 million, what will its return on assets be?
|
Expert Solution
Step 1
The return on assets indicates the profitability of the company. It is the comparison of the net income with the average total assets. The return on assets is considered good if it is higher.
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