A) If a firm increases its sales and cost of goods sold while holding its inventories constant, then, other things held constant, its inventory turnover ratio will decrease.
B) A reduction in inventories held would have no effect on the current ratio.
C) An increase in inventories would have no effect on the current ratio.
D) If a firm increases its sales and cost of goods sold while holding its inventories constant, then, other things held constant, its inventory turnover ratio will increase.
E) A reduction in the inventory turnover ratio will generally lead to an increase in the ROE.
G) B) and C)
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A) If a firm has the highest price/earnings ratio of any firm in its industry, then, other things held constant, this suggests that the board of directors should fire the president.
B) If a firm has the highest market/book ratio of any firm in its industry, then, other things held constant, this suggests that the board of directors should fire the president.
C) Other things held constant, the higher a firm's expected future growth rate, the lower its P/E ratio is likely to be.
D) The higher the market/book ratio, then, other things held constant, the higher one would expect to find the Market Value Added (MVA) .
E) If a firm has a history of high Economic Value Added (EVA) numbers each year, and if investors expect this situation to continue, then its market/book ratio and MVA are both likely to be below average.
G) C) and D)
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A) 1.94
B) 2.15
C) 2.39
D) 2.66
E) 2.93
G) C) and E)
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A) $2.14
B) $2.26
C) $2.38
D) $2.50
E) $2.63
G) C) and D)
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A) Heidee would have the higher net income as shown on the income statement.
B) Without more information, we cannot tell if Heidee or Leaudy would have a higher or lower net income.
C) Heidee would have the lower equity multiplier for use in the DuPont equation.
D) Heidee would have to pay more in income taxes.
E) Heidee would have the lower net income as shown on the income statement.
G) A) and C)
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A) Use cash to reduce long-term bonds outstanding.
B) Borrow using short-term notes payable and use the cash to increase inventories.
C) Use cash to reduce accruals.
D) Use cash to reduce accounts payable.
E) Use cash to reduce short-term notes payable.
G) B) and C)
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A) Issue new common stock and use the proceeds to acquire additional fixed assets.
B) Offer price reductions along with generous credit terms that would (1) enable the firm to sell some of its excess inventory and (2) lead to an increase in accounts receivable.
C) Issue new common stock and use the proceeds to increase inventories.
D) Speed up the collection of receivables and use the cash generated to increase inventories.
E) Use some of its cash to purchase additional inventories.
G) A) and B)
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A) Its total assets turnover must equal the industry average.
B) Its total assets turnover must be above the industry average.
C) Its return on assets must equal the industry average.
D) Its TIE ratio must be below the industry average.
E) Its total assets turnover must be below the industry average.
G) A) and E)
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A) 1.34
B) 1.41
C) 1.48
D) 1.55
E) 1.63
G) A) and D)
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A) 0.49
B) 0.61
C) 0.73
D) 0.87
E) 1.05
G) A) and C)
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A) Increase inventories while holding sales and cost of goods sold constant.
B) Increase accounts receivable while holding sales constant.
C) Increase EBIT while holding sales constant.
D) Increase accounts payable while holding sales constant.
E) Increase notes payable while holding sales constant.
G) All of the above
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A) 6.49%
B) 6.83%
C) 7.19%
D) 7.55%
E) 7.92%
G) A) and C)
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A) Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10%, and its debt increases from 40% of total assets to 60%.Under these conditions, the ROE will decrease.
B) Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60%.Under these conditions, the ROE will increase.
C) Suppose a firm's total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and its debt increases from 40% of total assets to 60%.Without additional information, we cannot tell what will happen to the ROE.
D) The modified DuPont equation provides information about how operations affect the ROE, but the equation does not include the effects of debt on the ROE.
E) Other things held constant, an increase in the debt ratio will result in an increase in the profit margin on sales.
G) All of the above
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B) False
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A) 2.03
B) 2.13
C) 2.25
D) 2.36
E) 2.48
G) All of the above
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A) The division's DSO (days' sales outstanding) is 40, whereas the average for its competitors is 30.
B) The division's basic earning power ratio is above the average of other firms in its industry.
C) The division's total assets turnover ratio is below the average for other firms in its industry.
D) The division's debt ratio is above the average for other firms in the industry.
E) The division's inventory turnover is 6, whereas the average for its competitors is 8.
G) C) and D)
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A) If a firm increases its sales while holding its accounts receivable constant, then, other things held constant, its days' sales outstanding will decline.
B) If a security analyst saw that a firm's days' sales outstanding (DSO) was higher than the industry average and was also increasing and trending still higher, this would be interpreted as a sign of strength.
C) If a firm increases its sales while holding its accounts receivable constant, then, other things held constant, its days' sales outstanding (DSO) will increase.
D) There is no relationship between the days' sales outstanding (DSO) and the average collection period (ACP) .These ratios measure entirely different things.
E) A reduction in accounts receivable would have no effect on the current ratio, but it would lead to an increase in the quick ratio.
G) C) and D)
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A) All else equal, increasing the debt ratio will increase the ROA.
B) The use of debt financing will tend to lower the basic earning power ratio, other things held constant.
C) A firm that employs financial leverage will have a higher equity multiplier than an otherwise identical firm that has no debt in its capital structure.
D) If two firms have identical sales, interest rates paid, operating costs, and assets, but differ in the way they are financed, the firm with less debt will generally have the higher expected ROE.
E) Holding bonds is better than holding stock for investors because income from bonds is taxed on a more favorable basis than income from stock.
G) C) and D)
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A) 6.00%
B) 6.32%
C) 6.65%
D) 6.98%
E) 7.33%
G) C) and D)
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A) Company Heidee has a lower operating income (EBIT) than Company LD.
B) Company Heidee has a lower total assets turnover than Company Leaudy.
C) Company Heidee has a lower equity multiplier than Company Leaudy.
D) Company Heidee has a higher fixed assets turnover than Company Leaudy.
E) Company Heidee has a higher ROE than Company Leaudy.
G) B) and E)
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