A) 4.19
B) 4.40
C) 4.62
D) 4.85
E) 5.09
Correct Answer
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Multiple Choice
A) The current and quick ratios both increase.
B) The inventory and total assets turnover ratios both decline.
C) The debt ratio increases.
D) The profit margin declines.
E) The EBITDA coverage ratio declines.
Correct Answer
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Multiple Choice
A) 3.03
B) 3.19
C) 3.36
D) 3.53
E) 3.70
Correct Answer
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True/False
Correct Answer
verified
Multiple Choice
A) If the interest rate the companies pay on their debt is less than their basic earning power (BEP) , then Company Heidee will have the higher ROE.
B) Given this information, Leaudy must have the higher ROE.
C) Company Leaudy has a higher basic earning power ratio (BEP) .
D) Company Heidee has a higher basic earning power ratio (BEP) .
E) If the interest rate the companies pay on their debt is more than their basic earning power (BEP) , then Company Heidee will have the higher ROE.
Correct Answer
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Multiple Choice
A) Use cash to reduce accounts payable.
B) Borrow using short-term notes payable and use the proceeds to reduce accruals.
C) Borrow using short-term notes payable and use the proceeds to reduce long-term debt.
D) Use cash to reduce accruals.
E) Use cash to reduce short-term notes payable.
Correct Answer
verified
Multiple Choice
A) 13.84
B) 14.57
C) 15.29
D) 16.06
E) 16.86
Correct Answer
verified
Multiple Choice
A) 2.70%
B) 2.97%
C) 3.26%
D) 3.59%
E) 3.95%
Correct Answer
verified
True/False
Correct Answer
verified
Multiple Choice
A) If a firm increases its sales and cost of goods sold while holding its inventories constant, then, other things held constant, its inventory turnover ratio will decrease.
B) A reduction in inventories held would have no effect on the current ratio.
C) An increase in inventories would have no effect on the current ratio.
D) If a firm increases its sales and cost of goods sold while holding its inventories constant, then, other things held constant, its inventory turnover ratio will increase.
E) A reduction in the inventory turnover ratio will generally lead to an increase in the ROE.
Correct Answer
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Multiple Choice
A) 7.95
B) 8.37
C) 8.81
D) 9.27
E) 9.74
Correct Answer
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Multiple Choice
A) $2.14
B) $2.26
C) $2.38
D) $2.50
E) $2.63
Correct Answer
verified
Multiple Choice
A) 0.56
B) 0.66
C) 0.78
D) 0.92
E) 1.08
Correct Answer
verified
True/False
Correct Answer
verified
True/False
Correct Answer
verified
Multiple Choice
A) Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10%, and its debt increases from 40% of total assets to 60%.Under these conditions, the ROE will decrease.
B) Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60%.Under these conditions, the ROE will increase.
C) Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60%.Without additional information, we cannot tell what will happen to the ROE.
D) The modified DuPont equation provides information about how operations affect the ROE, but the equation does not include the effects of debt on the ROE.
E) Other things held constant, an increase in the debt ratio will result in an increase in the profit margin on sales.
Correct Answer
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Multiple Choice
A) All else equal, increasing the debt ratio will increase the ROA.
B) The use of debt financing will tend to lower the basic earning power ratio, other things held constant.
C) A firm that employs financial leverage will have a higher equity multiplier than an otherwise identical firm that has no debt in its capital structure.
D) If two firms have identical sales, interest rates paid, operating costs, and assets, but differ in the way they are financed, the firm with less debt will generally have the higher expected ROE.
E) Holding bonds is better than holding stock for investors because income from bonds is taxed on a more favorable basis than income from stock.
Correct Answer
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True/False
Correct Answer
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Multiple Choice
A) 33.87%
B) 35.00%
C) 36.40%
D) 38.00%
E) 40.00%
Correct Answer
verified
Multiple Choice
A) If a firm has the highest price/earnings ratio of any firm in its industry, then, other things held constant, this suggests that the board of directors should fire the president.
B) If a firm has the highest market/book ratio of any firm in its industry, then, other things held constant, this suggests that the board of directors should fire the president.
C) Other things held constant, the higher a firm's expected future growth rate, the lower its P/E ratio is likely to be.
D) The higher the market/book ratio, then, other things held constant, the higher one would expect to find the Market Value Added (MVA) .
E) If a firm has a history of high Economic Value Added (EVA) numbers each year, and if investors expect this situation to continue, then its market/book ratio and MVA are both likely to be below average.
Correct Answer
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