An increase in financial leverage generally results in a higher return on equity (ROE). true or false
An increase in financial leverage generally results in a higher return on equity (ROE).
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True
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False
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A company’s return on assets should be greater than its return on equity.
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True
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False
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An optimal current ratio should be greater than 1.0.
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True
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False
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GoodTimes, Inc. has asset turnover of 0.5 times, a net profit margin of 10% and average total assets of $100, what is its net income (assuming no unusual items)?
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$50
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$500
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$5
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The answer cannot be determined with the information provided
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Common-size financial statements are constructed in order to:
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Adjust for inflation and risk
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Facilitate comparisons of different-sized companies
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To comply with SEC requirements
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All of the above
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A company builds a new plant and finances its construction by issuing stock. Which ratio is least likely to be affected, all else being equal?
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Current ratio
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Debt to equity ratio
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Debt to asset ratio
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Net fixed assets to total assets
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A company has net working capital of $0, current liabilities of $25 and total assets equal to $100. What is its current ratio?
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0.0
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1.0
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0.5
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4.0
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Analysis of a company’s financial statements: Below are simplified versions of the balance sheet and income statement for Toys by Tom, Inc. Use this information to answer question 9.
Sales in 2003 were $10,000. Therefore, the compounded average growth rate is:
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8.6%
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6.7%
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6.3%
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Not enough information available
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The cash cycle measures the days required to produce finished goods or delivered services.
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True
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False
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In general, an increase in a liability is a source of funds.
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True
False[removed]
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