GB550 UNIT 2 QUIZ answers

GB550 UNIT 2 QUIZ

GB550 UNIT 2 QUIZ Question 1. 1 Branch Corp.’s total assets at the end of last year were $315,000 and its net income after taxes was $22,750. What was its return on total assets? (Points : 2)

7.22%

7.58%

7.96%

8.36%

Question 2. 2. Vang Corp.’s stock price at the end of last year was $33.50 and its earnings per share for the year were $2.30. What was its P/E ratio? (Points : 2)

13.84

14.57

15.29

16.06

Question 3. 3. Pace Corp.’s assets are $625,000, and its total debt outstanding is $185,000. The new CFO wants to employ a debt ratio of 55%. How much debt must the company add or subtract to achieve the target debt ratio? (Points : 2)

$158,750

$166,688

$175,022

$183,773

Question 4. 4. Orono Corp.’s sales last year were $435,000, its operating costs were $362,500, and its interest charges were $12,500. What was the firm’s times interest earned (TIE) ratio? (Points : 2)

4.72

4.97

5.23

5.80

Question 5. 5. An investor is considering starting a new business. The company would require $475,000 of assets, and it would be financed entirely with common stock. The investor will go forward only if she thinks the firm can provide a 13.5% return on the invested capital, which means that the firm must have an ROI of 13.5%. How much net income must be expected to warrant starting the business?
(Points : 2)

$52,230

$54,979

$57,873

$64,125

Question 6. 6. High current and quick ratios always indicate that a firm is managing its liquidity position well. (Points : 2)

True

False

Question 7. 7. Debt management ratios show the extent to which a firm’s managers are attempting to magnify returns on owners’ capital through the use of financial leverage. (Points : 2)

True

False

Question 8. 8. Which of the following statements is CORRECT? (Points : 2)

The four most important financial statements provided in the annual report are the balance sheet, income statement, cash budget, and the statement of stockholders’ equity

The balance sheet gives us a picture of the firm’s financial position at a point in time

The income statement gives us a picture of the firm’s financial position at a point in time

The statement of cash flows tells us how much cash the firm has in the form of currency and demand deposits.

Question 9. 9.Which of the following would indicate an improvement in a company’s financial position, holding other things constant? (Points : 2)

The inventory and total assets turnover ratios both decline

The debt ratio increases

The profit margin declines

The current and quick ratios both increase

Question 10. 10. Which of the following statements is CORRECT? (Points : 2)

A reduction in inventories held would have no effect on the current ratio.

An increase in inventories would have no effect on the current ratio.

If a firm increases its sales while holding its inventories constant, then, other things held constant, its inventory turnover ratio will increase.
A reduction in the inventory turnover ratio will generally lead to an increase in the ROE.

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