Financial Accounting: The Impact on Decision Makers
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN: 9781305654174
Author: Gary A. Porter, Curtis L. Norton
Publisher: Cengage Learning
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General Accounting 8.7 Question:
Last year Urbana Corp. had $197,500 of assets, $307,500 of sales, $19,575 of
net income, and a debt-to-total-assets ratio of 37.5%. The new CFO believes a
new computer program will enable it to reduce costs and thus raise net income
to $33,000. Assets, sales, and the debt ratio would not be affected.
By how much would the cost reduction improve the ROE?
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Transcribed Image Text:General Accounting 8.7 Question: Last year Urbana Corp. had $197,500 of assets, $307,500 of sales, $19,575 of net income, and a debt-to-total-assets ratio of 37.5%. The new CFO believes a new computer program will enable it to reduce costs and thus raise net income to $33,000. Assets, sales, and the debt ratio would not be affected. By how much would the cost reduction improve the ROE?
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