If a firm’s ROE is low and management wants to improve it, explain how using more debtmight help.

Q: an you think of certain types of businesses/industries wherein a high amount of debt is typical and…

A: Introduction : In simple words, debt refers to the form of capital in which the company issues fixed…

Q: What is meant by the term ‘financial distress’. If we assume that financial distress exists, explain…

A: Financial obligations are liabilities of an entity towards outsiders such as suppliers, vendors,…

Q: xplain what is meant by the term ‘financial distress’. If we assume that financial distress exists,…

A: Explain what is meant by the term ‘financial distress’ Answer: Meaning of  'Financial distress' -…

Q: Why does a Financial Manager need to choose which source of financing a company should use? What do…

A: The business finance sources which are available to businesses are working capital loans, retained…

Q: Managers owning a small proportion of a firm's equity can be expected to work less, maintain more…

A: The owners or shareholders and the management team are different in a company. Ideally, managers…

Q: How does added debt potentially decrease the value of a firm?

A: Debt can be positive as well as negative, firms prefer to use debt in their capital structure to…

Q: In finance, as in accounting, the two sides of the balance sheet must be equal.  we valued the asset…

A: High leverage in a company refers that the proportion of debt is significantly higher than a normal…

Q: Financial managers should consider this when.improving the financials of the firm

A: Financial managers function within the domian of financial management and here financial managers…

Q: What can be said about a firm whose owners’ equity is a negative amount? How could such a situation…

A:

Q: Using more debt lowers profits and thus the ROA. Why doesn’t debt have the samenegative effect on…

A: Return on Assets (ROA): It is a ratio which states the relation between net income and total assets…

Q: A company needs financing. The CFO is proposing that her company issues debt rather than equity,…

A: 1. The CFO wants to take advantage of the prevailing low-interest rates with a view of taking…

Q: Critique this statement: “The use of debt financing lowers the net income of the firm, and hence…

A: The statement has two parts:The use of debt financing lowers the net income of the firm,Hence debt…

Q: how do banks improve their net profit margin to increase Return on Equity?

A: Return on Equity (ROE) measures the company’s net income to the value of its total shareholders’…

Q: When agency and bankruptcy costs are considered, the optimal capital structure has a debt level…

A: Capital structure is the distribution of finances of the company in debt and equity.

Q: · A company has to decide the proportion in which it should have its own finance and outsider's…

A: "Hi, Thanks for the question, since you posted multiple questions, we will answer the first question…

Q: If the firm borrows money at a significantly lower rate, this factor affects the firm's MARR. How?

A: If the firm borrows money at a lower rate then, MARR will also be lower.

Q: How can finance managers access and monitor the health and performance of a company?

A: This question explains about the finance managers access and monitor the health and performance of a…

Q: How banks can improve their return on equity and what are its negative externalities.

A: RoE is ubiquitous in banks, serving as both an indicator of overall performance and a means of…

Q: It can be true that for one industry, a certain level of debt is acceptable, but for another, it can…

A: The level of acceptable debt varies from one industry to another and while for one industry a given…

Q: The difference between the market value of the firm and the amount of money invested in the firm is…

A: An investor takes into consideration the market value of the company to decide whether investment…

Q: If the financial market is frictionless, the cost of equity is higher than the cost of debt in all…

A: A financial market is a place where people may exchange low-cost financial securities and…

Q: Financial markets are important because A. It gives investors equal footing with debtors B. Capital…

A: The answer is option A. Financial markets are important because it gives investors equal footing…

Q: Which is the quickest way to determine whether a firm has too much debt?

A: A business is supposed to be overleveraged when it is conveying an excessive amount of debt when…

Q: What are pros and cons of raising money with debt? What is an alternative and why might some…

A: When a corporation generates funds by issuing debt instruments, this is known as debt financing.…

Q: Evaluate the effect of gearing on cost of capital and firm value taking into consideration the…

A: The term “gearing” can be defined as the tool to gauge company’s financial leverage by emphasizing…

Q: Income taxes have the effect of A. increasing the cost of debt for a firm. B. decreasing the cost of…

A: Income tax is a compulsory payment made to government on income earned during financial year. Income…

Q: ROA and ROE are considered as the performance evaluation tools for banks. Do they always move in the…

A: Return on equity (ROE) and return on assets (ROA) are two of the most critical metrics to determine…

Q: key benefits associated with refunding debt are the reduction in the firm's debt ratio and the…

A: The debt ratio is ratio that dictates that how much company has taken the debt out of its total…

Q: Which of the following is a disadvantage of long-term debt as a means of company financing? Group…

A: Funds are very important and necessary for smooth running of a business organization. A business has…

Q: How can the use of debt serve to discipline managers?

A: A debt in a capital structure is a liability for the company on which company is bound to earn as…

Q: Debt-deflation leads to lower income because: O falling prices redistribute income from debtors to…

A: Debt deflation is an economic theory. It occurs when fall in prices leads to increase of debt burden…

Q: EBITDA makes companies with asset-heavy balance sheets look healthier than they may actually be.•…

A: It is abbreviation for Earnings Before Interest, tax , Depreciation, and Amortization. It is used to…

Q: (1) What factors might lead a company to gainadditional funds through debt financing rather…

A: Financial Activities: Financial exercises are exercises that organizations embrace to assist with…

Q: How can a company expand itself out of business, and how can a finance management prevent this from…

A: There are various methods that are been used by the company in order to expand its business. A good…

Q: What effect does financial leverage have on a company's return on equity and its overall valuation?…

A: In this question we have three parts and we need to answer one by one.

Q: Which is more favorable for a business - huge debts or small debts? Justify your position

A: Stockholders’ equity is the measure of assets staying in a business after the sum total of the…

Q: Why does the use of debt lower the profit margin and the ROA?

A: Company needs to raise the fund to have the capital which needs for the business for multiple…

Q: Which of the following is most consistent with using debt to reduce agency costs or conflicts?…

A: Statement number 4 is consistent with using debt to reduce agency costs or conflicts.

Q: should we expect the flotation costs for debt to be significantly lower than those for equity

A: Flotation costs are the expenses incurred by a firm when it issues fresh stock. Flotation costs…

Q: Please explain: Managers estimate bad debt expense based on​ which of the following? professional…

A: Accounting principles means those set of standards which is followed while preparing the books of…

Q: Understanding the impact of debt in the capital structure Suppose you are conducting a workshop on…

A: From the given list we have to identify the items which are correct are as follows: 1) An increase…

Q: n as a remedy for agency costs and -problems, and therefore create value in companies. However, in…

A: Debt are important source of capital but too much debt will create problems.

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.