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D076 PRE-ASSESSMENT EXAM
OFFICIAL EXAM QUESTIONS WITH
ANSWERS.
1. How can the DuPont framework help a company assess its
return on equity? - correct answer -It allows the company to
determine how its abilities to generate profits, manage assets,
and use financing contribute to the return on equity.
2. Which action increases the return on equity of a firm if all else
remains constant? - correct answer -Increasing debt financing
3. What is a component of the DuPont framework? - correct
answer -Return on assets
4. Another name for debt or liability - correct answer -Leverage
5. Which actions, taken together, will certainly increase a firm's
ROE? - correct answer -Decreasing equity financing and
increasing net margin
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6. What is one way that a firm can improve its return on equity? -
correct answer -Successfully cutting production costs to boost
net margin
7. Which action will increase the return on equity of a firm? -
correct answer -Increasing the asset usage efficiency of the
firm
8. Which ratio helps an analyst evaluate whether a company can
cover its short-term obligations? - correct answer -Current ratio
9. An investment analyst is concerned about a construction
company's ability to sell its inventory to meet current
obligations, because much of the inventory (commercial
buildings) it builds and sells takes longer than a year to
construct.
10. Which ratio should this analyst use to consider the effect of
the firm's inventory on the firm's ability to meet current
obligations? - correct answer -quick ratio
D076 PRE-ASSESSMENT EXAM
OFFICIAL EXAM QUESTIONS WITH
ANSWERS.
1. How can the DuPont framework help a company assess its
return on equity? - correct answer -It allows the company to
determine how its abilities to generate profits, manage assets,
and use financing contribute to the return on equity.
2. Which action increases the return on equity of a firm if all else
remains constant? - correct answer -Increasing debt financing
3. What is a component of the DuPont framework? - correct
answer -Return on assets
4. Another name for debt or liability - correct answer -Leverage
5. Which actions, taken together, will certainly increase a firm's
ROE? - correct answer -Decreasing equity financing and
increasing net margin
, Page | 2
6. What is one way that a firm can improve its return on equity? -
correct answer -Successfully cutting production costs to boost
net margin
7. Which action will increase the return on equity of a firm? -
correct answer -Increasing the asset usage efficiency of the
firm
8. Which ratio helps an analyst evaluate whether a company can
cover its short-term obligations? - correct answer -Current ratio
9. An investment analyst is concerned about a construction
company's ability to sell its inventory to meet current
obligations, because much of the inventory (commercial
buildings) it builds and sells takes longer than a year to
construct.
10. Which ratio should this analyst use to consider the effect of
the firm's inventory on the firm's ability to meet current
obligations? - correct answer -quick ratio
