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
Under current accounting rules, plant and equipment appear on a firm’s balance sheet valued at its replacement value Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Gordon and Lintner, recognizing that dividends affect stock prices, suggest that positive effects of dividend increases are attributable ________. A) directly to the dividend policy B) directly to the optimal capital structure C) not to the informational content but to the consistency in the payment of dividends D) to the informational content of the dividends […]
Date: September 19th, 2020
Who reads financial statements? List five internal and external readers of financial statements and provide an example of the type of information that they might be interested in and discuss why. What will be an ideal response? ANSWER Internal readers could be the CEO, financial managers, marketing managers, operations manager, and human resource […]
Date: September 19th, 2020
The firm’s ________ indicates the degree to which effective use of borrowing contributed to the firm’s ROE. A) asset turnover B) financial leverage C) profit margin D) return on assets ANSWER B
Date: September 19th, 2020
Gordon’s “bird-in-the-hand” argument suggests that ________. A) dividends are irrelevant B) firms should have a 100 percent payout policy C) shareholders are risk averse and attach less risk to current dividends D) the market value of a firm is unaffected by dividend policy ANSWER C
Date: September 19th, 2020
Use the following ratios for Crimson Industries Inc., to estimate the firm’s ROE. Net profit margin = 8.62%, asset turnover = 1.68, return on assets = 14.48%, financial leverage = 1.35, debt to equity ratio = 35%. A) 2.10% B) 0.99% C) 5.07% D) 19.55% ANSWER D Explanation: D) ROE = Net Profit […]
Date: September 19th, 2020
Modern Comics Inc., has sales of $2,500,000, net income of $50,000, assets worth $1,700,000, and total common stockholder equity of $1,500,000. The ROE for the firm is: A) 68.00%. B) 60.00%. C) 2.94%. D) 3.33%. ANSWER D Explanation: D) ROE = NI/Equity = $50,000/$1,500,000 =3.33%
Date: September 19th, 2020
What is Regency’s net working capital in 2012 and 2011? A) $27 million; $12 million B) $315 million; $276 million C) $39 million; $27 million D) None of the above ANSWER A Explanation: A) NWC = C/A – C/L: 2012 = $171,000,000 – $144,000,000 = $27,000,00. 2011: = $144,000,000 – $132,000,000 = $12,000,000.
Date: September 19th, 2020
