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Description: A company has:Return on Asset 0.08Cost of the debt 0.04.What is the Cost of Equity if the debt-equity ratio is 0.58

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A company has: Return on Asset 0.08 Cost of the debt 0.04. What is the Cost of Equity if the debt-equity ratio is 0.58

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 24MCQ: When analyzing a companys debt to equity ratio, lithe ratio has a value that is greater than one,...

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Concept explainers

Financial Ratios

A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.

Return on Equity

The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.

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A company has:
Return on Asset 0.08
Cost of the debt 0.04.
What is the Cost of Equity if the debt-equity ratio is 0.58

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