Question

James will make sure that he will consider ______________ in working out the financial plan for his firm sometime next week.

I. the net working capital needs

II. the products to be sold in Mexico

III. the employees to be hired locally

IV. the customers to whom the firm's products are sold

Bob is planning on buying shares of Facebook stock, he might be more interested in knowing the firm's ______________ ratios.

• return on equity and price-earnings

• return on assets and profit margin

• long-term debt and times interest earned

• price-earnings and debt-equity

• market-to-book and times interest earned

To enable his determination of the amount of fixed assets that is required to support each dollar of sales for his firm, Dave has to collect information related to the firm's :

I. current amount of current assets

II. current level of current liabilities

III. current level of interest expenses

IV. maximum sales over the past 10 year sales

• I, II, and III only

• II, III, and IV only

• I, II, III, and IV

• none of the given options is required

• I and III only

Answer 1

First question:

Financial plan to be worked out is current or short term in nature, for the next week. Hence the issue to be considered is the financing plan for next week which is the net working capital. Therefore, answer is option I.

Second question:

All the parameters listed in various options are matters of interest for analysts for various purposes. However, for an investor in shares, the ratios directly related to the return on equity and valuation are of more concern. The most appropriate combination is the one contained in the first option, ie. Return on Equity and Price Earnings Ratio.

Third question:

Fixed assets are essentially for expansion or, in some cases, for replacement. Requirement of fixed assets is not directly related to the various parameters listed viz. level of current assets and current liabilities, present interest expenses and maximum sales over the last 10 years. Hence the answer is that 'none of the given options is required'.