FIN 534 Week 2 Homework Chapter 3

FIN/534 Homework Week 2 Chapter 3 (Instant Download)

1. Which of the following statements is CORRECT?
a. The ratio of long-term debt to total capital is more likely to experience seasonal fluctuations than is either the DSO or the inventory turnover ratio.
b. If two firms have the same ROA, the firm with the most debt can be expected to have the lower ROE.
c. An increase in the DSO, other things held constant, could be expected to increase the total assets turnover ratio.
d. An increase in the DSO, other things held constant, could be expected to increase the ROE.
e. An increase in a firm’s debt ratio, with no changes in its sales or operating costs, could be expected to lower the profit margin.

2. Companies HD and LD have the same tax rate, sales, total assets, and basic earning power. Both companies have positive net incomes. Company HD has a higher debt ratio and, therefore, a higher interest expense. Which of the following statements is CORRECT?

FIN 534 Week 1 Homework Chapter 2

FIN 534 Week 1 Homework Chapter 2

FIN/534 Week 1 Homework Chapter 2

FIN 534 – Homework Chapter 2

1. Which of the following statements is CORRECT?

a. Typically, a firm’s DPS should exceed its EPS.

b. Typically, a firm’s EBIT should exceed its EBITDA.

c. If a firm is more profitable than average (e.g., Google), we would normally expect to see its stock price exceed its book value per share.

d. If a firm is more profitable than most other firms, we would normally expect to see its book value per share exceed its stock price, especially after several years of high inflation.

e. The more depreciation a firm has in a given year, the higher its EPS, other things held constant.

2. Which of the following statements is CORRECT?