Reference no: EM132496211

Question 1: Nell Inc., earns a rate of return on common stockholders' equity of 16%. Which of the following will cause the rate of return to increase?

a. Issuing 12% bonds and investing the proceeds to earn 14%

b. Increasing the size of the cash dividend paid on common stock

c. An increase in the company's price-earnings ratio

d. An increase in the market price of the company's stock

Question 2: Extensive use of leverage is usually associated with:

a. A low equity ratio

b. A high current ratio

c. A low debt ratio

d. High quality of earnings

Question 3: The yield of investors in bonds:

a. Is the effective interest rate that can be earned by buying bonds at their current market price and holding them to maturity

b. Is measured by the debt ratio

c. Is measured by the number of times interest requirements are earned

d. Increases as market prices of bonds increase

Question 4: From the viewpoint of short-term creditors, which of the following relationshis would be the least meaningful?

a. Short-term notes payable as a percentage of accounts payable

b. The amount of working capital

c. The accounts receivable turnover

d. Quick assets as percentage of current liabilities

Question 5: At the end of year 10, Brave Corporation has a current ratio of 2:1. Which of the following transactions will decrease the current ratio?

a. Issuance of long-term bonds at a premium

b. Sale of merchandise on open account at a price above cost

c. The accounts receivable turnover

d. Quick assets as percentage of current liabilities