a. Why is the rate earned on stockholders equity by a thriving business ordinarily higher than the

Question:

a. Why is the rate earned on stockholders’ equity by a thriving business ordinarily higher than the rate earned on total assets?

b. Should the rate earned on common stockholders’ equity normally be higher or lower than the rate earned on total stockholders’ equity? Briefly explain.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Financial and Managerial Accounting

ISBN: 978-0538480895

11th Edition

Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren

See More Books

Question Posted: Oct 14, 2011 05:30 AM

See More Questions

(a) Why is the rate earned on stockholders equity by a thriving business ordinarily higher than the rate earned on total assets? (b) Should the rate earned on common stockholders equity normally be...
Why is the rate used to discount FCFF different from the rate used to discount FCFE?
Why is the rate on commercial paper usually less than the prime rate charged by bankers and more than the Treasury bill rate?
Data for Sabanci Holding can be found in the table below. Theincome statement items correspond to revenues or costs during theyear ending in either 2018 or 2019. The balance sheet itemscorrespond t 2...
Jared Company had beginning inventory of $40,000; net sales of $275,000; and cost of goods purchased of $160,000. In the previous year, the company had a gross profit margin of 45%. Calculate the...
Offering respectful feedback on their logic model as if you were a member of their work group. Identify strengths and potential weaknesses in the assumptions or areas that may require additional...
Explain the reason the Genetic Information Nondiscrimination Act was enacted.
Myagi Farm Supply Company manufactures and sells a fertilizer called Basic II. The following data are available for preparing budgets for Basic II for the first 2 quarters of 2012.1. Sales: Quarter...
Each year Exxon-Mobil expends large amounts of funds for mechanical safety features throughout its worldwide operations. Carla Ramos, a lead engineer for Mexico and Central American operations, plans...
Reshier Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dry and wet-vacuuming...
a. How does the rate earned on total assets differ from the rate earned on stockholders equity? b. Which ratio is normally higher? Explain.
Describe two reports provided by independent auditors in the annual report to shareholders.
The market demand for stuffed rabbits is Q = 2,600 20P, and the government intends to place a $4 per bunny tax on stuffed rabbit purchases. Calculate the deadweight loss of this tax when: a. Supply...
Why is the Fed unable to eliminate recessions?
What is an overnight reverse repurchase agreement (ON RRP)? What role does the interest on ON RRP play in the way the Fed hits its target for the federal funds rate in the current ample-reserves...
An article in the Wall Street Journal in June 2023 noted: After holding the fed-funds rate near zero following the Covid19 pandemic, the Fed had raised the rate at every meeting since March 2022 by a...
In 1995, two dermatologists, Dr. Katie Rodin and Dr. Kathy Fields, developed what they believed was a medical breakthrough to fight acne. Their mission: to help millions of people rid themselves of...
In 2022, as the inflation rate in the United States was rapidly increasing, an editorial in the Wall Street Journal argued: In practice, forward guidance has tied the Fed to loose policies when...
How does a repurchase agreement that a bank might enter into with a securities dealer regarding a U.S. Treasury bill substitute for the borrowing of federal funds from another bank?
Privitera and Freeman (2012) constructed a scale to measure or estimate the daily fat intake of participants; the scale was called the estimated daily intake scale for fat (EDIS-F). To validate the...
Computer forensics is a rapidly expanding field with new software packages appearing all the time. Beyond the two largest players right now, search the Internet to find an open source or proprietary...
What types of accounts are referred to as temporary accounts?
What is the purpose of the post-closing trial balance?
What is the natural business year?
Recommend an optimal improvement to the company's future financial goals.
Your bank account pays a nominal interest rate of 1 1 % , compounded semi - annually. Your plan is to deposit $ 2 , 4 0 0 in the account at the end of each of the next 1 0 years. How much will you...
A partnership has total equity of $464,000. Partnership equity consists of Green, Capital, $324,000, and Tan, Capital, $140,000. Net income and loss is shared in a ratio of 85% to Green and 15% to...

a. Why is the rate earned on stockholders equity by a thriving business ordinarily higher than the

Question:

Step by Step Answer:

a Due to leverage the rate on stockholders equity will often ...View the full answer

Financial and Managerial Accounting

Students also viewed these Managerial Accounting questions