Question

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25- The measure of net income returned from every dollar invested in total assets is the:(…………..).

A. profit margin.

B. return on assets.

C. return on equity.

D. asset turnover.

E. earnings before interest and taxes.

26- The financial ratio that measures the accounting profit per dollar of book equity is referred to as the:(…………..).

A. profit margin.

B. return on assets.

C. return on equity.

D. asset turnover.

E. earnings before interest and taxes.

27- The amount that investors are willing to pay for each dollar of annual earnings is reflected in the:(…………..).

A. profit margin.

B. return on assets.

C. return on equity.

D. asset turnover.

E. earnings before interest and taxes.

28- The market-to-book ratio is measured as the:(…………..).

A. market price per share divided by the par value per share.

B. net income per share divided by the market price per share.

C. market price per share divided by the net income per share.

D. market price per share divided by the dividends per share.

E. market value per share divided by the book value per share.

29- Which one of the following statements is correct concerning ratio analysis?

A. A single ratio is often computed differently by different individuals.

B. Ratios do not address the problem of size differences among firms.

C. Only a very limited number of ratios can be used for analytical purposes.

D. Each ratio has a specific formula that is used consistently by all analysts.

E. Ratios cannot be used for comparison purposes over periods of time.

30- Which one of the following is a liquidity ratio?

A. quick ratio

B. cash coverage ratio

C. total debt ratio

D. EV multiple

E. times interest earned ratio.

31- An increase in which one of the following accounts increases a firm's current ratio without affecting its quick ratio?

A. accounts payable

B. cash

C. inventory

D. accounts receivable

E. fixed assets

32- A supplier, who requires payment within ten days, should be most concerned with which one of the following ratios when granting credit?

A. current

B. cash

C. debt-equity

D. quick

E. total debt

33- A firm has a total debt ratio of .47. This means the firm has 47 cents in debt for every:(................).

A. $1 in total equity.

B. $.53 in total assets.

C. $1 in current assets.

D. $.53 in total equity.

E. $1 in fixed assets.

34- The long-term debt ratio is probably of most interest to a firm's:(................).

A. credit customers.

B. employees.

C. suppliers.

D. mortgage holder.

E. stockholders.

35- From a cash flow position, which one of the following ratios best measures a firm's ability to pay the interest on its debts?.

A. times interest earned ratio

B. cash coverage ratio

C. cash ratio

D. quick ratio

E. interval measure.

36- The higher the inventory turnover, the:(................).

A. less time inventory items remain on the shelf.

B. higher the inventory as a percentage of total assets.

C. longer it takes a firm to sell its inventory.

D. greater the amount of inventory held by a firm.

E. lesser the amount of inventory held by a firm.

37- If a firm produces a return on assets of 15 percent and also a return on equity of 15 percent, then the firm:(................).

A. has no debt of any kind.

B. is using its assets as efficiently as possible.

C. has no net working capital.

D. also has a current ratio of 15.

E. has an equity multiplier of 2.

38- If stockholders want to know how much profit the firm is making on their entire investment in that firm, the stockholders should refer to the:(................).

A. Profit margin.

B. Return on assets.

C. Return on equity.

D. Equity multiplier.

E. Earnings per share.

39- Assume BGL Enterprises increases its operating efficiency by lowering its costs while holding its sales constant. As a result, given all else constant, the:(................).

A. return on equity will increase.

B. return on assets will decrease.

C. profit margin will decline.

D. equity multiplier will decrease.

E. price-earnings ratio will increase.

40- Which one of the following sets of ratios would generally be of the most interest to stockholders?

A. return on assets and profit margin

B. quick ratio and times interest earned

C. price-earnings ratio and debt-equity ratio

D. return on equity and price-earnings ratio

E. cash coverage ratio and equity multiplier

41- ROE is: (…………..).

A) Return on Equity.

B) Return on investment.

C) All the above.

42-The return on equity can be calculated as: (…………..).

A. ROA × Equity multiplier.

B. Profit margin × ROA.

C. Profit margin × ROA × Total asset turnover.

D. ROA ×(Net income / Total assets).

E. ROA × Debt-equity ratio.

43-Which one of the following depicts a correct relationship?

A. Dividend payout ratio = 1 – Retention ratio

B. Total asset turnover = 1 + Capital intensity ratio

C.ROA = ROE × (1 + Debt-equity ratio)

D. ROE = 1 – ROA

E. Equity multiplier = 1 – Debt-equity ratio

44- DuPont known as: (…………..).

A) Du Pont Equation.

B) Du Pont Model.

C) All of the above.

45- The DuPont identity can be computed as: (…………..).

A. Net income × Profit margin × (1 + Debt-equity ratio).

B. Profit margin × (1 / Capital intensity) × (1 + Debt-equity ratio).

C. Net income × Total asset turnover × Equity multiplier.

D. Profit margin × Total asset turnover × Debt-equity ratio.

E. Return on equity × Profit margin × Total asset turnover.

46- If a firm decreases its operating costs, all else constant, then the: (…………..).

A. profit margin will decrease.

B. return on assets will decrease.

C. total asset turnover rate will increase.

D. cash coverage ratio will decrease.

E. price-earnings ratio will decrease.

47- It is easier to evaluate a firm using its financial statements when the firm: (…………..).

A. is a conglomerate.

B. is global in nature.

C. uses the same accounting procedures as other firms in its industry.

D. has a different fiscal year than other firms in its industry.

E. tends to have one-time events such as asset sales and property acquisitions.

48- The most effective method of directly evaluating the financial performance of a firm is to compare the financial ratios of the firm to: (…………..).

A. the firm’s ratios from prior time periods and to the ratios of firms with similar operations.

B. the average ratios of all firms within the same country over a period of time.

C. those of other firms located in the same geographic area that are similarly sized.

D. the average ratios of the firm’s international peer group.

E. those of the largest conglomerate that has operations in the same industry as the firm.

49- The equity multiplier measures: (…………..).

A. financial leverage.

B. returns to stockholders.

C. operating efficiency.

D. management efficiency.

E. asset use efficiency.

50- The Expressions to breaks Return on Equity are : (…………..).

A) Profitability.

B) Financial Leverage.

C) All of the above.

Answer 1

As the question only requires the correct answer without explanations please find below the same:

• 25 B. return on assets.
• 26 C. return on equity.
• 27 B. return on assets.
• 28 E. market value per share divided by the book value per share.
• 29 A. A single ratio is often computed differently by different individuals.
• 30 A. quick ratio
• 31 C. inventory
• 32 B. cash
• 33- A. $1 in total equity.
• 34 E. stockholders.
• 35 A. times interest earned ratio.
• 36 A. less time inventory items remain on the shelf.
• 37 A. has no debt of any kind.
• 38 C. Return on equity.
• 39 A. return on equity will increase.
• 40 D. return on equity and price-earnings ratio
• 41 A) Return on Equity.
• 42 A. ROA × Equity multiplier.
• 43 A. Dividend payout ratio = 1 – Retention ratio
• 44 C) All of the above.
• 45 B. Profit margin × (1 / Capital intensity) × (1 + Debt-equity ratio).
• 46 E. price-earnings ratio will decrease.
• 47 C. uses the same accounting procedures as other firms in its industry.
• 48 A. the firm’s ratios from prior time periods and to the ratios of firms with similar operations.
• 49 A. financial leverage.
• 50 C) All of the above.