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44. After-tax operating income for a leveraged firm is defined as:
45. Which one of these changes indicates an improvement in a firm's asset management
efficiency?
46. What is the market price of a share of stock for a firm with 100,000 shares outstanding, a
book value of equity of $3,000,000, and a market-to-book ratio of 3?
47. Which one of the following may be the best measure of company performance?
48. Which one of these statements is correct?
49. The board of directors is dissatisfied with last year's ROE of 15%. If the profit margin and
asset turnover ratio remain unchanged at 8% and 1.25, respectively, by how much must the
leverage ratio (i.e., assets/equity) increase to achieve 20% ROE?
50. What must happen to asset turnover to leave ROE unchanged from its original 16% level
if the profit margin is reduced from 8% to 6% and the leverage ratio increases from 1.2 to 1.6?
Asset turnover must:
51. The use of debt in the firm's capital structure will increase ROE if the firm:
52. The only measure of firm performance that accounts for cost of capital is:
53. A corporation declares $25 million in net income, $1 million in preferred stock dividends,
and $7 million in common stock dividends. By how much will shareholders' equity increase on the
balance sheet?
54. Which of the following statements is correct for a firm in which depreciation expense
exceeds EBIT? The firm:
55. A firm's after-tax operating income was $1,000,000 in 2013. It started the year with a total
capitalization of $8,000,000 and ended the year with a total capitalization of $9,000,000. The
additional capital raised during 2013 started to affect the operating income in 2014. Which value
best represents the return on capital for 2013?
56. If ROC is less than a firm's cost of capital, which of the following must be true?
57. When will ROE equal ROC?
58. If a firm has a debt-equity ratio of .45, long-term debt of $500, and equity of $2,000,
then:
59. What is the approximate total debt ratio for a firm with a total debt-equity ratio of .65?
60. Which one of the following will increase a firm's times interest earned ratio?
61. Which one of the following would likely be most detrimental to a firm's current ratio if
that ratio is currently 2?
62. A retail store with zero net working capital has:
63. A deficiency of the standard measures of liquidity is that the measures:
64. A firm has average daily expenses of $2.13 million and average accounts payable of
$112.7 million. On average, how many days does it take the firm to pay its bills?
65. If a company has a healthy current ratio but a significantly lower quick ratio, then you can
assume that:
66. Last year's asset turnover ratio was 2.0. Sales have increased by 25% and average total
assets have increased by 10% since that time. What is the current asset turnover ratio?
67. What is the inventory turnover ratio for ABC Corp. if cost of goods sold equals $5,000,
current ratio equals 3, quick ratio equals 1.5, and the firm has $1,800 in current assets?
68. Assume BDS acquired its main supplier, ABC. As a result of the acquisition, BDS finds
that its profit margin increased but its ROA remained constant. A decrease in which one of these
ratios is most apt to be the reason why the ROA did not increase with the increase in the profit
margin?
69. A firm's profit margin when ignoring the effects of financing is 20% with an EBIT of $1.5
million and sales of $5 million. How much did the firm pay in taxes?
70. What is primarily responsible for the potential distortion among the ROA of different firms
when net income is used in the numerator of ROA?
71. Which one of the following changes will provide an increase (if only in the short-run) in a
firm's ROE?
72. An increase in which one of the following will have no effect on the cash coverage ratio?
73. What is the book value per share for a firm with 2 million shares outstanding at a price of
$50, a market-to-book ratio of .75, and a dividend-payout ratio of 50%?
