Question Details

Maple Furniture recently issued new common stock 


1)	During the latest year Ruth Corp. had sales of $300,000 and a net income of $20,000, and its year-end assets were $200,000. The firm's total debt to total assets ratio was 40%. Based on the Du Pont equation, what was the firm's ROE?
A.	15.33%
B.	15.67%
C.	16.00%
D.	16.33%
E.	16.67%


	2)	Considered alone, which of the following would increase a company's current ratio?
A.	An increase in accounts receivable.
B.	An increase in accounts payable.
C.	An increase in net fixed assets.
D.	An increase in notes payable.
E.	An increase in accrued liabilities.


	3)	If the CEO of a firm were filling out a fitness report on a division manager (i.e., "grading" the manager), which of the following situations would be likely to cause the manager to get a BETTER GRADE? In all cases, assume that other things are held constant.
A.	The division's total assets turnover ratio is below the average for other firms in the industry.
B.	The division's DSO (days' sales outstanding) is 40, whereas the average for competitors is 30.
C.	The division's inventory turnover is 6, whereas the average for competitors is 8.
D.	The division's debt ratio is above the average for other firms in the industry.
E.	The division's basic earning power ratio is above the average of other firms in the industry.


	4)	Companies J and K each reported the same earnings per share (EPS), but Company J's stock trades at a higher price. Which of the following statements is CORRECT?
A.	Company J must have a higher P/E ratio.
B.	Company J must have a higher market-to-book ratio.
C.	Company J must be riskier.
D.	Company J must have fewer growth opportunities.
E.	Company J must pay a lower dividend.


	5)	Maple Furniture recently issued new common stock and used the proceeds to pay off some of its short-term notes payable. This action had no effect on the company's total assets or operating income. Which of the following effects would occur as a result of this action?
A.	The company's equity multiplier increased.
B.	The company's basic earning power ratio increased.
C.	The company's times interest earned ratio decreased.
D.	The company's debt ratio increased.
E.	The company's current ratio increased.




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