FIN 300 ALL SET QUESTIONS AND ANSWERS SURE
A+
✔✔A net profit margin of 3.76% means:
a. for every dollar of sales, income of $3.76 is generated
b. for every dollar of sales, income of $.0376 is generated
c. for every dollar of equity, income of $.0376 is generated
d. for every dollar of assets, income of $3.76 is generated - ✔✔b. for every dollar of
sales, income of $.0376 is generated
✔✔Return on equity is most accurately described as a measure of:
a. return on assets combined with liquidity
b. the return available to all stockholders in the company
c. the return on capital based on common stockholder investment
d. is the amount of net income paid to retained earnings after allowing for dividends paid
- ✔✔c. the return on capital based on common stockholder investment
✔✔Given a debt/total asset ratio of 75% and a ROE of 12% we know that:
a. the owners of XYZ are financing 75% of the firm's assets in order to receive a 12%
return on their personal investment in the company's stock
b. Profits equal 12% of the firm's sales
c. the firm can cover interest payments with $0.25 of every dollar left for profit
d. 25% of assets are financed with owners' equity - ✔✔d. 25% of assets are financed
with owners' equity
✔✔Return on equity is a measure of the firm's:
a. liquidity
b. asset utilization
c. debt level
d. profitability - ✔✔d. profitability
✔✔The Modified DuPont equation is most accurately described as a function of:
, a. profitability and debt
b. return on assets and debt load
c. return on equity
d. asset utilization - ✔✔b. return on assets and debt load
✔✔A significantly higher average collection period than the industry average suggests
(ceteris paribus):
a high profit levels
b. poor credit decisions
c. low liquidity levels
d. rapid collection of accounts - ✔✔b. poor credit decisons
✔✔If the inventory turnover ratio is very high relative to industry averages:
a .the firm has too high a level of inventory
b. the firm may be losing sales if its inventory is too low
c. the firm has good total assets management practices
d. the firm has too many items that the customers probably do not want - ✔✔b. the firm
may be losing sales if its inventory is too low
✔✔ Profit maximization as a goal of the firm:
a. is an economic principle and not an accounting one
b. is superior to other goals that could be pursued
c. maximizes the wealth of the owners
d. does not consider cash flow or risk - ✔✔d. does not consider cash flow or risk
✔✔Wealth maximization as a goal of the firm:
a. is usually discounted by bondholders
b. takes a long-run perspective and focuses on the owners of the firm
c. is a long-run perspective used by financial managers for internal use only
d. is an accounting number - ✔✔b. take a long-run perspective and focuses on the
owners of the firm
✔✔An important advantage a general partner usually has is:
a. limited liability
b. usually a larger share of profit distribution when the firm is successful
c. unlimited liability
d. profits received are tax-free - ✔✔b. usually a larger share of profit distribution when
the firm is successful
✔✔A Subchapter S corporation:
a. is a large corporation
b. has limited liability for its owners
c. is double taxed
d. has unlimited liability for its owners - ✔✔b. has limited liability for for its owners
A+
✔✔A net profit margin of 3.76% means:
a. for every dollar of sales, income of $3.76 is generated
b. for every dollar of sales, income of $.0376 is generated
c. for every dollar of equity, income of $.0376 is generated
d. for every dollar of assets, income of $3.76 is generated - ✔✔b. for every dollar of
sales, income of $.0376 is generated
✔✔Return on equity is most accurately described as a measure of:
a. return on assets combined with liquidity
b. the return available to all stockholders in the company
c. the return on capital based on common stockholder investment
d. is the amount of net income paid to retained earnings after allowing for dividends paid
- ✔✔c. the return on capital based on common stockholder investment
✔✔Given a debt/total asset ratio of 75% and a ROE of 12% we know that:
a. the owners of XYZ are financing 75% of the firm's assets in order to receive a 12%
return on their personal investment in the company's stock
b. Profits equal 12% of the firm's sales
c. the firm can cover interest payments with $0.25 of every dollar left for profit
d. 25% of assets are financed with owners' equity - ✔✔d. 25% of assets are financed
with owners' equity
✔✔Return on equity is a measure of the firm's:
a. liquidity
b. asset utilization
c. debt level
d. profitability - ✔✔d. profitability
✔✔The Modified DuPont equation is most accurately described as a function of:
, a. profitability and debt
b. return on assets and debt load
c. return on equity
d. asset utilization - ✔✔b. return on assets and debt load
✔✔A significantly higher average collection period than the industry average suggests
(ceteris paribus):
a high profit levels
b. poor credit decisions
c. low liquidity levels
d. rapid collection of accounts - ✔✔b. poor credit decisons
✔✔If the inventory turnover ratio is very high relative to industry averages:
a .the firm has too high a level of inventory
b. the firm may be losing sales if its inventory is too low
c. the firm has good total assets management practices
d. the firm has too many items that the customers probably do not want - ✔✔b. the firm
may be losing sales if its inventory is too low
✔✔ Profit maximization as a goal of the firm:
a. is an economic principle and not an accounting one
b. is superior to other goals that could be pursued
c. maximizes the wealth of the owners
d. does not consider cash flow or risk - ✔✔d. does not consider cash flow or risk
✔✔Wealth maximization as a goal of the firm:
a. is usually discounted by bondholders
b. takes a long-run perspective and focuses on the owners of the firm
c. is a long-run perspective used by financial managers for internal use only
d. is an accounting number - ✔✔b. take a long-run perspective and focuses on the
owners of the firm
✔✔An important advantage a general partner usually has is:
a. limited liability
b. usually a larger share of profit distribution when the firm is successful
c. unlimited liability
d. profits received are tax-free - ✔✔b. usually a larger share of profit distribution when
the firm is successful
✔✔A Subchapter S corporation:
a. is a large corporation
b. has limited liability for its owners
c. is double taxed
d. has unlimited liability for its owners - ✔✔b. has limited liability for for its owners
