Working Capital Management
Not what you're looking for?
Howard is deciding if he should pursue a restricted or relaxed current asset investment policy. His annual sales are $200,000; its fixed assets are $50,000; debt and equity are each 50 percent of total assets. EBIT is $18,000, the interest rate on the firm's debt is 05 percent, and his company's tax rate is 20 percent. With a restricted policy, current assets will be 7.5 percent of sales. Under a relaxed policy, current assets will be 12.5 percent of sales. What is the difference in the projected ROEs between the restricted and relaxed policies?
Purchase this Solution
Solution Summary
This solution is comprised of a detailed explanation to answer what is the difference in the projected ROEs between the restricted and relaxed policies.
Solution Preview
Howard is deciding if he should pursue a restricted or relaxed current asset investment policy. His annual sales are $200,000; its fixed assets are $50,000; debt and equity are each 50 percent of total assets. EBIT is $18,000, the interest rate on the firm's debt is 05 percent, and his company's tax rate is 20 percent. With a restricted policy, current assets will be 7.5 percent of sales. Under a relaxed policy, current assets will be 12.5 percent of sales. What is the difference in the projected ROEs between the restricted and relaxed policies?
Under restricted policy, current assets will be ...
Purchase this Solution
Free BrainMass Quizzes
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.