Question

True or False?

1) PepsiCo has a higher debt ratio than Chevron (use the latest financial statements on Yahoo).
2) Apple has a higher profit margin than Gilead Science (use the latest financial statements on Yahoo).
3) Even if a firm's cash flow projections indicate that it will soon be unable to meet its interest payments, a bankruptcy case cannot begin until the firm defaults on a scheduled payment.
4) When a firm increases its common stock dividend, it must also increase its preferred stock dividend.   
5) From the issuer’s point of view, preferred stock is generally less risky than bonds.
6) If the profits of a business increase from one year to the next, the company will usually increase the preferred stock dividend amount.
7) If you do not pay your student loans, your wages may be garnished.
8) A stock split will increase common stock equity which will decrease the firm’s debt/equity ratio.
9) Fully utilizing your credit card limit will improve your FICO credit score.
10) According to a car loan article, it is a good idea to purchase an extended warranty from the car dealer.
11) Car dealers will always offer a good financing deal, even if your FICO score is relatively low.
12) According to the article on getting a car loan, it is better to tell the dealer how much you can afford to pay monthly before you negotiate the sales price.
13) A floating rate mortgage is riskier than a fixed-rate mortgage.
14) Payday loans are a relatively inexpensive way to borrow money.
15) If you co-sign on a loan, you will only be required to pay that loan if the primary borrower is bankrupt.
16) If you increase your insurance deductible, your insurance premium will decrease.
17) When market interest rates increase, bond prices will increase as well.
18) If the exchange rate for the Euro went from $1.10/EUR to $1.15/EUR, the Euro strengthened.
19) If the exchange rate for the Peso went from 11 peso/$ to 12 peso/$, the Dollar strengthened.
20) If the exchange rate for the UKP went from $1.25/UKP to $1.30/UKP, the Dollar strengthened.
21) According to purchasing power parity, if the price of a big mac is more expensive in London at current exchange rates, the UK Pound is undervalued.
22) Increasing the strike (exercise) price on a warrant will increase the value of the warrant.
23) The primary reason managers give for an acquisition is to increase sales.
24) A spin-off occurs when the assets of a division are sold to another firm.
25) Over the long term, US Treasuries have had a higher return than an index fund of investment-grade bonds.

Answer 1

1) True. Formula used debt ratio = Total Liabilities/Total Assets. Use quarter ending september 2019 balance sheets
Pepsi co debt ratio = 0.81

Chevron debt ratio = 0.39

2) True. Profit margin formula= net profit/ revenue.
Apple's profit margin = 21.50%

Gilead science profit margin = 12.04%

3) False

4) False.