Answer Options:
a. True
b. False
Answer: a. True
Question: The profit margin measures net income per dollar of sales. Answer Options a. True b. False
Answer: a. True
Question: Klein Cosmetics has a profit margin of 5.0%, a total assets turnover ratio of 1.5 times, no debt and therefore an equity multiplier of 1.0, and an ROE of 7.5%. The CFO recommends that the firm borrow funds using long-term debt, use the funds to repurchase some of the company’s own stock.
Answer Options:
a. True
b. False
Answer: b. False
Question: In general, it’s better to have a low inventory turnover ratio than a high one, as a low ratio indicates that the firm has an adequate stock of inventory relative to sales and thus will not lose sales as a result of running out of stock. a. True b. False
Answer: b. False
Question: Both interest and dividends paid by a corporation are deductible operating expenses, hence they decrease the firm’s taxes.
Answer Options:
a. True
b. False
Answer: b. False
Question: Significant variations in accounting methods among firms make meaningful ratio comparisons between firms more difficult than if all firms used the same or similar accounting methods. Answer Options a. True b. False
Answer: a. True
Question: If a firm is reporting its income in accordance with generally accepted accounting principles, then its net income as reported on the income statement should be equal to its free cash flow.
Answer Options:
a. True
b. False
Answer: b. False
Question: Other things held constant, the more debt a firm uses, the lower its operating margin will be. Answer Options a. True b. False
Answer: b. False
Question: Other things held constant, the higher a firm’s total debt to total capital ratio (measured as (Short-term debt + Long-term debt)/(Debt + Preferred stock + common equity)), the higher its TIE ratio will be. a. True b. False
Answer: b. False
Question: The value of the target firm is calculated by discounting residual cash flows that belong to the acquiring firm’s shareholders at the target’s cost of equity reflecting any changes to its capital structure as a result of the merger.
Answer Options:
a. True
b. False
Answer: a. True
Question: Peptide bonds in the protein will react with the reagent and form a _____ colored complex.
Answer Options:
Green
Yellow
Purple
Black
Answer: Purple
Question: The advantage of the basic earning power ratio (BEP) over the return on total assets for judging a company’s operating efficiency is that the BEP does not reflect the effects of debt and taxes. Answer Options a. True b. False
Answer: b. False
Question: EBITDA stands for earnings before interest, taxes, debt, and assets.
Answer Options:
a. True
b. False
Answer: b. False
Question: What’s the common variable measured in both CLV formulas?
Answer Options:
Average Number of Payments
Probability of Success
Profit Margin (M)
Number of Periods
Answer: Number of Periods
Question: The retained earnings account on the balance sheet does not represent cash. Rather, it represents part of the stockholders’ claims against the firm’s existing assets. Put another way retained earnings are stockholders’ reinvested earnings.
Answer Options:
a. True
b. False
Answer: a. True