Dubs & Co. has a debt ratio of 0.50, a total assets turnover of 0.25, and a profit margin of 10%. The CEO is unhappy with the current return on equity, and he thinks it could be doubled. This could be accomplished by increasing the profit margin to 14% and increasing debt utilization. Total assets turnover will not change. What new debt ratio, along with the 14% profit margin, is required to double the return on equity?

Dubs & Co. has a debt ratio of 0.50, a total assets turnover of 0.25, and a profit margin of 10%. The CEO is unhappy with the current return on equity, and he thinks it could be doubled. This could be accomplished by increasing the profit margin to 14% and increasing debt utilization. Total assets turnover will not change. What new debt ratio, along with the 14% profit margin, is required to double the return on equity?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 10P

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