Creative Productions Inc., has a tax rate of 30%, an EBIT of $400,000. NWC of $80,000, fixed assets of $1,200,000, and current liabilities of $220,000 and a cost of capital of 12.35%. What is the firm’s ROIC? A) 33.33% B) 12.35% C) 21.88% D) 26.92% ANSWER C Explanation: C) ROIC = (EBIT * […]
Date: September 19th, 2020
Which of the following statements regarding the income statement is NOT CORRECT? A) The income statement shows the flow of earnings and expenses generated by the firm between two dates. B) The income statement shows the earnings and expenses at a given point in time. C) The last or”bottom” line of the income statement shows […]
Date: September 19th, 2020
In most states, legal capital is measured either by the par value of common stock; other states, however, define legal capital to include not only the par value of the stock, but also any paid-in capital in excess of par. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The asset turnover ratio: A) considers how much revenue a firm is able to generate relative to its asset base. B) affects the firm’s ROE in that a higher ratio increases ROE and a lower ratio decreases ROE other things equal. C) captures the capital intensity of a business: the more capital intense a firm […]
Date: September 19th, 2020
Carbon Fiber Design and Build Inc. is considering the purchase of new a new carbon molding machine for use in their Sports Operations department. The investment would be an expansion of an industry segment that the firm knows well. You have been tasked with helping the division manager determine the WACC in advance of an […]
Date: September 19th, 2020
Gross profit is calculated as: A) total sales – cost of sales – selling, general, and administrative expenses – depreciation and amortization. B) total sales – cost of sales – selling, general, and administrative expenses. C) total sales – cost of sales. D) None of the above ANSWER C
Date: September 19th, 2020
If a firm has overdue liabilities or is legally insolvent or bankrupt, most states prohibit its payment of cash dividends. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Working capital management is the management of: A) long-term debt. B) short-term assets and liabilities. C) capital assets and equity. D) short-term debt, long-term debt, and equity. ANSWER B
Date: September 19th, 2020
The firm’s ________ indicates how much the firm’s profits contribute to ROE. A) asset turnover B) financial leverage C) profit margin D) return on assets ANSWER C
Date: September 19th, 2020
Which of the following statements about EBIT and EBITDA margins is TRUE? A) EBIT and EBITDA ratios are one of the few sets of ratios that tend to be the same across almost all industries. B) These ratios tell the firm what percentage of sales dollars are available to cover interest, taxes, and to provide […]
Date: September 19th, 2020
