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__________ is the return to investors divided by total assets.

Select one:

a. Return on investment

b. Return on average assets

c. Return on assets

d. Return on risk

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Which form of payment causes a company to pay taxes twice on the same amount?

Select one:

a. Dividends

b. Interest

c. Stock splits

d. Net present value

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Which of the following is not an assumption in capital structure theory?

Select one:

a. Potential investors carry the same assumptions about a company's risks.

b. Companies can measure business risk.

c. Investors trade stocks and bonds in perfect capital markets.

d. All the above are assumptions in capital structure theory.

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A company is evaluating its options for filing bankruptcy and needs to determine the total costs it would incur as a result of being in distress. Below is a summary of the information for this scenario:
• Filing fees equal $100.
• Creditor-revised terms would increase the financing costs of the company by 2% upward on the existing $1,000 floating credit facility annually.
• Expected loss in customer sales equals $30 annually.
What is the company's total cost to choose bankruptcy?

Select one:

a. $100 annually

b. $150 annually

c. $300 annually

d. $500 annually

Answer 1

Answer 2	Option C is correct i.e. return on assets. Retun on assets = Net income/Total assets
	Return to investors means earning of the company divided by total assets is called return on assets.
Answer 3	Option A is correct i.e. Dividends.
	On dividends double taxes are paid as dividend is not tax deductible expense like interest and hence tax is paid o such distribution to investors and other time is when dividend is paid dividend distribution tax is paid along which is separate from income tax already paid.
Answer 4	Option C is correct i.e. Investors trade stocks and bonds in perfect capital markets.
	Investors trade stocks and bonds in perfect capital markets, is not one of assumption od capital structure theory. It has 9 assumption and point is is not one of them so capital structure theory neend not that investors trade stock and bonds in perfect capital markets, means capital market can be inefficient.
Answer 5	Option B is correct i.e. $150 annualy
	Filling fees = $100 Increase in interest cost = $1000*2% = $20 Loss in sales = $30