Question Details

Which of the following actions would be most likely to reduce conflicts 


1. If your mark-up ratio is 25%, what is the margin ratio? 
 a. 15%      b. 20%      c.  25%     d.  28%      e.  30%

2. Chang Corp. has $375,000 of assets, and it uses only common equity capital (zero debt).  Its sales for the last year were $595,000, and its net 
income was $25,000.  Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 
15.0%.  What profit margin would the firm need in order to achieve the 15% ROE, holding everything else constant?
a. 9.45%     b. 9.93%    c. 10.42%     d. 10.94%     e. 11.49%

3. Last year Harrington Inc. had sales of $325,000 and a net income of $19,000, and its year-end assets were $250,000.  The firm's total-debt-to-
total-assets ratio was 45.0%.  Based on the DuPont equation, what was the ROE?
a. 13.82%     b. 14.51%     c. 15.23%     d. 16.00%     e. 16.80%

4. Which one is not one of the four major financial statements?
a. annual report       b. balance sheet     c. income statement   d. state of cash flows    e. state of retained earnings or state of stockholders’ equity

5. Which of the following actions would be most likely to reduce conflicts between stockholders and bondholders?
a.	Including restrictive covenants in the company- bond indenture (which is the contract between the company and its bondholders).
b.	Compensating managers with more stock options and less cash income.
c.	The passage of laws that make it harder for hostile takeovers to succeed.
d.	A government regulation that banned the use of convertible bonds.
e.	The firm begins to use only long-term debt, e.g., debt that matures in 30 years or more, rather than debt that matures in less than one year.



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