Which of the following best represents operating income? A) Income after financing activities B) Earnings before interest and taxes C) Income from capital gains D) Income from discontinued operations ANSWER B
Date: September 19th, 2020
How many times can the Johnson Corporation cover their interest expenses if the firm has sales of $3,000,000, total assets of $2,100,000, EBIT equal to $1,000,000, a tax rate of 40% and interest expense of $250,000? A) 1.43 B) 2.10 C) 4.00 D) 12.00 ANSWER C Explanation: C) TIE = EBIT/I = $1,000,000/$250,000 […]
Date: September 19th, 2020
Capital budgeting techniques are ________ assessment tools to determine whether a firm should proceed with an investment in ________. A) qualitative; a project. B) qualitative; working capital. C) quantitative; a project. D) quantitative; working capital. ANSWER C
Date: September 19th, 2020
Diversification of stocks reduces unsystematic or firm-specific risk, leaving systematic or market risk. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A firm reports the following income statement items: sales of $60,550,000; income tax of $1,744,000; operating expenses of $10,115,000; cost of goods sold $34,025,000; and interest expense of $750,000. What is the amount of the firm’s EBIT? A) $18,154,000 B) $14,935,000 C) $16,410,000 D) $7,775,000 ANSWER C Explanation: C) EBIT = Sales – […]
Date: September 19th, 2020
As we move from government bonds to corporate bonds to blue chip stocks to small company stocks we tend to be moving away from safe investments toward investments with greater risk. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Pavillion Corp. has $6,000,000 in total assets, $1,500,000 in current assets, and $4,000,000 in equity. Calculate the debt-to-asset ratio. A) 0.33 B) 0.50 C) 0.25 D) 0.67 ANSWER A Explanation: A) D/A = (T/A – Equity)/T/A = ($6,000,000 – $4,000,000)/$6,000,000 = 0.33.
Date: September 19th, 2020
Another name for market risk is: A) systematic risk. B) standard deviation. C) unsystematic risk. D) total risk. ANSWER A
Date: September 19th, 2020
All else equal, investors “like” ________ and “dislike” ________. A) risk; return. B) return; risk. C) standard deviation; risk. D) diversification; return. ANSWER B
Date: September 19th, 2020
Because dividends are taxed at the same rate as capital gains under the 2003 Tax Act, a firm’s strategy of paying low or no dividends primarily offers tax advantages to wealthy stockholders through tax deferral. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
