Assume that the following financial ratios are calculated for Royals Corporation in 2012: Asset turnover 0.625 Common

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Assume that the following financial ratios are calculated for Royals Corporation in 2012:

Asset turnover                                                 0.625

Common equity leverage                                0.685

Capital structure leverage                               2.50

Return on assets                                              9.50%

Return on sales (profit margin)                   15.20%

a. What was the return on equity for Royals Corporation in 2012?

b. If Royals Corporation keeps all of its other ratios constant in 2013 but increases its capital structure leverage ratio 2.75, what will be the 2013 return on equity?

c. If Royals Corporation keeps all of its other ratios constant in 2013 but increases its profit margin to 16%, what will be the 2013 return on equity?


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