Companies hd and ld have the same tax rate sales total

Reference no: EM13394964

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?

a. Company HD has a lower equity multiplier.
b. Company HD has more net income.
c. Company HD pays more in taxes.
d. Company HD has a lower ROE.
e. Company HD has a lower times interest earned (TIE) ratio.

3.Companies HD and LD have the same total assets, sales, operating costs, and tax rates, and they pay the same interest rate on their debt. However, company HD has a higher debt ratio.Which of the following statements is CORRECT?

a. Given this information, LD must have the higher ROE.
b. Company LD has a higher basic earning power ratio (BEP).
c. Company HD has a higher basic earning power ratio (BEP).
d. If the interest rate the companies pay on their debt is more than their basic earning power, then Company HD will have the higher ROE.
e. If the interest rate the companies pay on their debt is less than their basic earning power, then Company HD will have the higher ROE.

4.The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.70, without affecting either sales or net income.Assuming that inventories are sold off and not replaced to get the current ratio to the target level,and that the funds generated are used to buy back common stock at book value, by how much would the ROE change?

a. 4.28%
b. 4.50%
c. 4.73%
d. 4.96%
e. 5.21%

5.Quigley Inc. is considering two financial plans for the coming year. Management expects sales to be $301,770, operating costs to be $266,545, assets to be $200,000, and its tax rate to be 35%.Under Plan A it would use 25% debt and 75% common equity. The interest rate on the debt would be 8.8%, but the TIE ratio would have to be kept at 4.00 or more. Under Plan B the maximum debt that met the TIE constraint would be employed. Assuming that sales, operating costs, assets, the interest rate, and the tax rate would all remain constant, by how much would the ROE change in response to the change in the capital structure?

a. 3.83%
b. 4.02%
c. 4.22%
d. 4.43%
e. 4.65%

Reference no: EM13394964

Questions Cloud

Enumerate three 3 factors that contributed to five guys : 1. determine how five guys philosophy sets it apart from other fast-food chains.2. analyze the original values for the

What would occur to equilibrium price and quantity if : illustrate the market for oranges with a supply and demand diagram. what would happen to equilibrium price and quantity

Find out the cost of head lamps that would appear in each : runcke motor company manufactures automobiles. during september 2011 the company purchased 5000 head lamps at a cost of

What are the key findings of the swot analysis done by : what are the key findings of the swot analysis done by conant. bullwhich of following term or terms best describes the

Companies hd and ld have the same tax rate sales total : 1.which of the following statements is correct?a.the ratio of long-term debt to total capital is more likely to

Determine the predicted yearly annual sales of the chrysler : market researchers at chrysler estimated the demand for their new chrysler crossfire sports cars as followsqc 1050000

Analyze the companyrsquos financial performance to : research the internet or the strayer library for a publicly traded company and then download the annual report for the

Recognize at least three barriers that impede an : delivering on a value proposition demands constant improvement and innovation as competition changes over time along

Establish five 5 key objectives for the company : assume that you are a business owner or business professional in a company and industry of your choice responsible for

User Account

All Pages