Finance discusion questions

Finance discusion questions.

4.7 DISADVANTAGES OF FINANCIAL LEVERAGE. The intuition behind the benefits of financial leverage is that a firm can borrow funds that bear a certain inter- est rate but invest those funds in assets that generate returns in excess of that rate. Why would firms with high ROAs not keep leveraging up their firm by borrowing and investing the funds in profitable assets?

4.12 CALCULATING BASIC AND DILUTED EPS. TJX, Inc., an apparel retailer, reported net income (amounts in thousands) of $609,699 for Year 4. The weighted average of common shares outstanding during Year 4 was 488,809 shares. TJX, Inc., subtracted inter- est expense net of tax saving on convertible debt of $4,482. If the convertible debt had been converted into common stock, it would have increased the weighted average common shares outstanding by 16,905 shares. TJX, Inc., has outstanding stock options that, if exercised, would increase the weighted average of common shares outstanding by 6,935 shares. Compute basic and diluted earnings per share for Year 4, showing supporting computations.

Save your time - order a paper!

Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines

Order Paper Now

4.13 RELATING ROA AND ROCE. Boston Scientific, a medical device manufac- turer, reported net income (amounts in millions) of $1,062 on sales of $5,624 during Year 4. Interest expense totaled $64. The income tax rate was 35 percent. Average total assets were $6,934.5, and average common shareholders’ equity was $3,443.5. The firm did not have preferred stock outstanding or minority interest in its equity.

  1. Compute the rate of ROA. Disaggregate ROA into profit margin for ROA and assets turnover components.
  2. Compute the rate of ROCE. Disaggregate ROCE into profit margin for ROCE, assets turnover, and capital structure leverage ratio components.
  3. Calculate the amount of net income to common shareholders derived from the excess return on creditors’ capital and the amount from the return on common shareholders’ capital.

Finance discusion questions

 
"If this is not the paper you were searching for, you can order your 100% plagiarism free, professional written paper now!"

"Do you have an upcoming essay or assignment due?


Get any topic done in as little as 6 hours

If yes Order Similar Paper

All of our assignments are originally produced, unique, and free of plagiarism.