(Solution) 1Homework #3, Chapter 2 Fingame Course Spring 2016 True Or False 1) Return On Assets Can Be Calculated As Profit Margin Times Asset Turnover. True | Snapessays.com


(Solution) 1Homework #3, Chapter 2 Fingame Course Spring 2016 True or False 1) Return on assets can be calculated as profit margin times asset turnover. True


I need these questions to be answered. I need them to be done by tonight 1Homework #3,

 

Chapter 2

 

Fingame Course

 

Spring 2016

 

True or False

 

1) Return on assets can be calculated as profit margin times asset turnover.

 

True

 

False

 

2) All else equal, a firm would prefer to have a higher gross margin.

 

True

 

False

 

Multiple Choice Questions:

 

3) Ptarmigan Travelers had sales of $420,000 in 2013 and $480,000 in 2014. The firm's current

 

asset accounts remained constant. Given this information, which one of the following statements

 

must be true?

 

a) The total asset turnover rate increased.

 

b) The days' sales in receivables increased.

 

c) The inventory turnover rate increased.

 

d) The fixed asset turnover decreased.

 

e) The collection period decreased.

 

f) Other, specify.

 

4) Assume you are a banker who has loaned money to a firm, but that firm is now facing

 

increased competition and reduced cash flows. Which one of the following ratios would you

 

most closely monitor to evaluate the firm's ability to repay its loan?

 

a) current ratio

 

b) debt-to-equity ratio c)

 

times-interest-earned ratio

 

d) times-burden-covered ratio

 

e) None of the above.

 

5) On a common-size balance sheet, all accounts are expressed as a percentage of:

 

a) sales.

 

b) profits.

 

c) equity.

 

d) total assets.

 

e) None of the above.

 

6) Which one of the following statements is correct?

 

a) If the debt-to-assets ratio is greater than 0.50, then the debt-to-equity ratio must be less than

 

1.0.

 

b) Long-term creditors would prefer the times-interest-earned ratio be 1.4 rather than 1.5.

 

c) The assets-to-equity ratio can be computed as 1 plus the debt-to-equity ratio.

 

d) To realize the best risk and reward profile, financial leverage should be maximized.

 

e) None of the above.

 

7) Primavera Holdings has a profit margin of 25%, an asset turnover of 0.5 and financial

 

leverage (assets to equity) of 1.5. Primavera has $20 billion in assets, of which half is in cash and

 

marketable securities. Assume that Primavera earns a 3 percent after-tax return on cash and

 

securities. What would Primavera's return on equity be if it paid out 90% of its cash and

 

marketable securities as a dividend to shareholders?

 


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