FIN310 FINAL EXAM UPDATED ACTUAL
Exam Questions and CORRECT Answers
39. (Ch. 4, DuPont Analysis) The Wilson Corporation has the following relationships:
Sales/Total assets 2.0 Return on assets (ROA) 4% Return on equity (ROE) 6%
What is Wilson's profit margin and debt ratio? Hint: use the DuPont equation.
a. 2% and 0.33
b. 4% and 0.33
c. 4% and 0.67
d. 2% and 0.67
e. 4% and 0.50 - CORRECT ANSWER -A
ROA = (Profit Margin) (Total Asset Turnover)
.04 = (PM) ( 2)
PM =.04/2
= .02 or 2%
ROE = (Profit Margin)(Total Asset Turnover) (Equity Multiplier)
.06 = (.02)*(2)*EM
.06 = .04*EM
EM =.06/.04= 1.5
Debt Ratio = 1−1/EM
= 1−1 1.5
= 1− 0.6666 = 33.3%
40. (Ch. 4; DuPont Ratio Analysis) The Wrawlings Corp. has the following relationships: Profit
Margin 3.8% Total Asset Turnover 1.5 x Debt Ratio 55.16% What is the firm's ROE?
A. 12.70%
, B. 3.14%
C. 25.22%
D. 11.09%
E. 5.72% - CORRECT ANSWER -A
43. (Ch. 4, DuPont Analysis) Ron's Railway has total assets of $500,000, net income of $50,000,
and sales of $750,000. The firm's debt ratio is 50%. Based upon the Extended DuPont Equation,
what is the firm's ROE?
a. 5%
b. 10%
c. 15%
d. 20%
e. 25% - CORRECT ANSWER -D
3. (Ch. 1, Shareholder Wealth Maximization) The proper goal of the financial managershould be
to maximize the firm's expected profit (or net income), since this will add themost wealth to each
of the individual shareholders (owners) of the firm.
a. True
b. False - CORRECT ANSWER -B
4. (Ch. 1, Shareholder Wealth Maximization) True or False: Maximizing Earnings Per
Share(EPS) is an example of maximizing shareholder wealth.
a. True
b. False - CORRECT ANSWER -B
14. (Ch. 1; Agency Relationships) Which of the following actions are likely to reduce
agencyconflicts between stockholders and managers?
Exam Questions and CORRECT Answers
39. (Ch. 4, DuPont Analysis) The Wilson Corporation has the following relationships:
Sales/Total assets 2.0 Return on assets (ROA) 4% Return on equity (ROE) 6%
What is Wilson's profit margin and debt ratio? Hint: use the DuPont equation.
a. 2% and 0.33
b. 4% and 0.33
c. 4% and 0.67
d. 2% and 0.67
e. 4% and 0.50 - CORRECT ANSWER -A
ROA = (Profit Margin) (Total Asset Turnover)
.04 = (PM) ( 2)
PM =.04/2
= .02 or 2%
ROE = (Profit Margin)(Total Asset Turnover) (Equity Multiplier)
.06 = (.02)*(2)*EM
.06 = .04*EM
EM =.06/.04= 1.5
Debt Ratio = 1−1/EM
= 1−1 1.5
= 1− 0.6666 = 33.3%
40. (Ch. 4; DuPont Ratio Analysis) The Wrawlings Corp. has the following relationships: Profit
Margin 3.8% Total Asset Turnover 1.5 x Debt Ratio 55.16% What is the firm's ROE?
A. 12.70%
, B. 3.14%
C. 25.22%
D. 11.09%
E. 5.72% - CORRECT ANSWER -A
43. (Ch. 4, DuPont Analysis) Ron's Railway has total assets of $500,000, net income of $50,000,
and sales of $750,000. The firm's debt ratio is 50%. Based upon the Extended DuPont Equation,
what is the firm's ROE?
a. 5%
b. 10%
c. 15%
d. 20%
e. 25% - CORRECT ANSWER -D
3. (Ch. 1, Shareholder Wealth Maximization) The proper goal of the financial managershould be
to maximize the firm's expected profit (or net income), since this will add themost wealth to each
of the individual shareholders (owners) of the firm.
a. True
b. False - CORRECT ANSWER -B
4. (Ch. 1, Shareholder Wealth Maximization) True or False: Maximizing Earnings Per
Share(EPS) is an example of maximizing shareholder wealth.
a. True
b. False - CORRECT ANSWER -B
14. (Ch. 1; Agency Relationships) Which of the following actions are likely to reduce
agencyconflicts between stockholders and managers?
