Can a company have negative free cash flow?
Answer Choices:
Yes
No
Answer: Yes
What makes a company “unleveraged”?
Answer Choices:
No equity
No debt
No taxes
Answer: No debt
What is free cash flow?
Answer Choices:
Cash used for depreciation
Cash left over after maintaining operations
Cash spent on dividends only
Answer: Cash left over after maintaining operations
Which of the following directly affect ROE in the DuPont equation?
Answer Choices:
Sales / Total Assets
Price per Share / EPS
Net Income / Sales
Answer: Sales / Total Assets
Net Income / Sales
Why is book value useful to assess management performance?
Answer Choices:
It reflects only past capital
It changes with share price
It shows immediate profits
Answer: It changes with share price
Which value changes when market price of shares changes?
Answer Choices:
Book value
Market value of equity
Retained earnings
Answer: Market value of equity
What is the most commonly used base item for a common size balance sheet?
Answer Choices:
Net income
EBIT
Total assets
Net sales
Answer: Total assets
Which of these would improve a company’s ROE?
Answer Choices:
Reduce expenses and interest
Increase interest rate on loans
Use more equity to increase multiplier
Increase net income with same sales
Answer: Reduce expenses and interest
Increase net income with same sales
The difference between market value and book value is known as:
Answer Choices:
Book surplus
Market Value Added (MVA)
Net earnings
Answer: Market Value Added (MVA)
If new common shares are issued but net income doesn’t change, ROE will:
Answer Choices:
Increase
Decrease
Stay the same
Answer: Decrease