Financial Accounting
9th Edition
ISBN: 9781259738692
Author: Libby
Publisher: MCG
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Chapter 13, Problem 4MCQ
To determine
Identify the correct option which indicates the positive financial leverage percentage.
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9.
Which of the following strategy enables a manager to report a higher current ratio?
Select one:
a.
Pay off accounts payable prior to year-end
b.
Purchase more fixed assets
c.
Purchase more fixed income securities
d.
Invest more in long term debt
7. A measure of the Company's long term debt paying ability is
Select one:
a. Dividend payout
b. time interest earned
c. Return on assets
d. Length of the operating cycle
Liquidity ratios measure the ability of the firm to meet debt obligations that come due beyond one year. True or False
Chapter 13 Solutions
Financial Accounting
Ch. 13 - Who are the primary users of financial statements?Ch. 13 - When considering an investment in stock, investors...Ch. 13 - How does product differentiation differ from cost...Ch. 13 - What are the two general methods for making...Ch. 13 - What are component percentages? Why are they...Ch. 13 - What is ratio analysis? Why is it useful?Ch. 13 - What do profitability ratios focus on? What is an...Ch. 13 - What do turnover ratios focus on? What is an...Ch. 13 - What do liquidity ratios focus on? What is an...Ch. 13 - What do solvency ratios focus on? What is an...
Ch. 13 - What do market ratios focus on? What is an example...Ch. 13 - Prob. 12QCh. 13 - Explain why rapid growth in total sales might not...Ch. 13 - A company has total assets of 500,000 and...Ch. 13 - Prob. 2MCQCh. 13 - Prob. 3MCQCh. 13 - Prob. 4MCQCh. 13 - Prob. 5MCQCh. 13 - Prob. 6MCQCh. 13 - Prob. 7MCQCh. 13 - Prob. 8MCQCh. 13 - Prob. 9MCQCh. 13 - Prob. 10MCQCh. 13 - Prob. 13.1MECh. 13 - Prob. 13.2MECh. 13 - Prob. 13.3MECh. 13 - Computing the Financial Leverage Percentage...Ch. 13 - Analyzing the Inventory Turnover Ratio A...Ch. 13 - Prob. 13.6MECh. 13 - Prob. 13.7MECh. 13 - Prob. 13.8MECh. 13 - Prob. 13.9MECh. 13 - Prob. 13.10MECh. 13 - Using Financial Information to Identify Companies...Ch. 13 - Prob. 13.2ECh. 13 - Prob. 13.3ECh. 13 - Prob. 13.4ECh. 13 - Prob. 13.5ECh. 13 - Prob. 13.6ECh. 13 - Prob. 13.7ECh. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - Prob. 13.10ECh. 13 - Inferring Financial Information from Ratios E13-11...Ch. 13 - Prob. 13.12ECh. 13 - Prob. 13.13ECh. 13 - Prob. 13.1PCh. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Computing Comparative Financial Statements and...Ch. 13 - Analyzing Financial Statements Using Ratios Use...Ch. 13 - Prob. 13.8PCh. 13 - Prob. 13.9PCh. 13 - Prob. 13.1APCh. 13 - Prob. 13.2APCh. 13 - Calculating Profitability, Turnover, Liquidity,...Ch. 13 - Prob. 13.4APCh. 13 - Prob. 13.5APCh. 13 - Prob. 13.6APCh. 13 - Prob. 13.1CPCh. 13 - Prob. 13.2CPCh. 13 - Comparing Companies within an Industry Refer to...Ch. 13 - Prob. 13.4CPCh. 13 - Inferring Information from the DuPont Model Ratios...Ch. 13 - Prob. 13.6CP
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- Which of the following statement is correct? Select one: O a. Return on assets is the ratio of net income after interest expense to total assets O b. All options are correct statement C. Average collection period is the average number of times it takes for the company's customers to pay their bills o d. Increase in the debt ratio indicate more reliance on debt as a source of financingarrow_forwardWhich of the following is true of a leverage ratio? It is a measure of the extent to which a company uses debt compared to equity. O It is a measure of whether the company will have sufficient cash to pay its bills over the following year. O It is a comparison of the company's net income to its stockholder's equity. O It is a measure of the company's ability to be profitable over the coming year. O It is a measure of the rate at which the company "turns over" its inventory.arrow_forward13. A short-term creditor would be interested in A. profitability ratio. B. efficiency ratio. C. liquidity ratio. D. leverage ratio. The quick ratio of a firm would be unaffected by which of the following? 14. A. Land held for investment is sold for cash. B. Equipment is purchased, financed by a long-term debt issue. C. Inventories are sold for cash D. Inventories are sold on a credit basis.arrow_forward
- Long-term solvency is indicated by a. Current ratio b. Debt/equity ratio c. Operating ratio d. Net profit ratioarrow_forwardWhich of the following statements are not true Select one: a. Profitability Index is a discounted technique b. Capitalisation are the total securities issued by a company c. Cash flows occurs over a series of years in capital budgeting decisions d. Some investment decisions are irreversible e. Borrowing is cheap compared to equityarrow_forwardConsider the table given below to answer the following question. Asset value Earnings Net investment Free cash flow (FCF) Return on equity (ROE) Asset growth rate Earnings growth rate Present value Year 1 4 5 6 7 8 9 10 11.00 3.07 3.35 2.51 2.74 2 3 12.65 14.55 16.73 18.74 20.99 23.50 25.62 27.93 30.44 1.65 1.90 2.18 2.51 2.81 3.04 3.29 3.46 1.65 1.90 2.18 2.01 2.25 2.52 2.12 2.31 0.50 0.56 0.52 1.18 0.61 1.15 0.15 0.15 0.15 0.15 0.15 0.145 0.14 0.135 0.11 0.11 0.15 0.15 0.15 0.12 0.12 0.12 0.09 0.09 0.09 0.09 0.15 0.15 0.15 0.12 0.08 0.08 0.05 -0.11 0.09 0.56 Assuming that competition drives down profitability (on existing assets as well as new investment) to 14.5% in year 6, 14% in year 7, 13.5% in year 8, and 11% in year 9 and all later years. What is the value of the concatenator business? Assume 14% cost of capital. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) millionarrow_forward
- Net working capital is defined as (select one): A. current assets minus current liabilities. B. a ratio measure of liquidity best used in cross-sectional analysis. C. current liabilities minus current assets. D. the portion of the firm's assets financed with short-term funds.arrow_forward5. The _____ or _____ interest rate reflects the real rate of return on an investment. a. annual or nominal b. periodic or effective c. periodic or compounding d. annual percentage yield or effectivearrow_forwardThe ratio that measures how much an investor is willing to pay for a dollar of earnings is known as a _____________ ratio. A. asset management B. market value C. profitabilityarrow_forward
- You have the following information about two firms, Debt Free, Incorporated and Debt Spree, Incorporated. Both firms have the same prospects for sales and EBIT, and both have the same level of assets, tax rate and borrowing rate. They differ in their use of debt financing. Scenario Bad year Normal year Good year Total assets Tax rate Debt Equity Borrowing rate Sales Interest expense for Debt Free Interest expense for Debt Spree $200 $275 $380 Debt Free $ 250 21% EBIT $12 $ 34 $ 51 $0 $ 250 16% Required: a. Calculate the interest expense for each firm: Debt Spree $ 250 21% $150 $ 100 16%arrow_forwardFinancial ratios that measure a firm's ability to pay its bills over the short run without undue stress are known as ratios. asset management financial leverage liquidity profitability market valuearrow_forwardLeverage is a. The ability to earn a satisfactory return on the investments in the business. b. The ability to pay current debts when they come due. c. The proportion of debt to stockholders' equity. d. Also called profit margin.arrow_forward
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