Question

Financial ratios are useful because they give us ways to make meaningful comparisons of a firm's financial data _________.

Group of answer choices

with other similar firms within the same geographic region.

all of the above.

to other firms within the same market.

across time.

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Question 32 pts

A company with callable bonds might buy back the bonds (call the bonds) from investors if prevailing interest rates decline. This is because the company could then re-issue the bonds at a lower interest rate.

Group of answer choices

True

False

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Question 42 pts

What is the primary difference between the current ratio and the acid-test ratio?

Group of answer choices

The current ratio measures the firm's ability to pay back long-term debt while the acid-test ratio measures the firm's ability to pay off short-term debt.

The current ratio includes total assets while the acid-test ratio only includes current assets in the numerator.

The current ratio includes current assets while the acid-test ratio only includes cash and accounts receivable in the numerator.

The current ratio measures liquidity while the acid-test ratio measures how well the firm is financing its assets.

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Question 52 pts

In general, a firm wants to improve its Average Collection Period (ACP). An increase in the ACP would indicate that the firm is collecting receivables quicker.

Group of answer choices

True

False

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Question 62 pts

The Profit Retention Ratio (also known as the Plowback Ratio) is used to estimate the growth of a firm. If an analyst estimated 6% growth for Magnavision Tech and the ROE is 15%, how much is the firm's Plowback Ratio?

Group of answer choices

Cannot be determined

Around 250%

Around 40%

Around 0.9%

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Question 72 pts

Valuation of a preferred stock can be calculated by considering the stock dividend and the market required rate of return. You can also estimate the expected rate of return based on its par value. What is the expected rate of return on a preferred stock for Biovid LLC with a par value of $70.25 per share and a $2.50 annual dividend?

Group of answer choices

Around 3.4%

Around 3.56%

Around 28%

Cannot be determined

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Question 82 pts

Key characteristics of a common shareholder most closely resembles the following:

Group of answer choices

Common shareholders receive a constant dividend payment, have a right to elect the board of directors, are residual owners and are limited in liability to the amount of their investment.

Common shareholders have preemptive rights, have a right to elect the board of directors, are residual owners and are limited in liability to the amount of their investment.

Common shareholders are guaranteed to receive a dividend and their investment is protected in case the firm is bankrupt.

Common shareholders have preemptive rights, have a right to elect the board of directors, are residual owners and have priority over preferred shareholders.

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Question 92 pts

Common equity, as it is reflected in the calculation of a firm's return on equity (ROE), is a measurement of the value of the common shares outstanding plus retained earnings.

Group of answer choices

True

False

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Question 102 pts

The difference between a discount bond and a premium bond is reflected in the relationship between the coupon rate and the yield to maturity. Which statement is true? If you have trouble recalling the relationship, calculate a random 5 year $1,000 Face Value bond with a coupon rate and yield to maturity to help answer the question correctly.

Group of answer choices

Where the coupon rate is higher than the yield to maturity, the bond will sell at a premium.

Where the coupon rate increases over time, the yield to maturity does not change.

As the bond face value increases, the bond 's discount value decreases.

Where the coupon rate is lower than the yield to maturity, the bond will sell at a premium.

Answer 1

Financial ratios are useful because they give us ways to make meaningful comparisons of a firm's financial data _________.

All of the above. the financial ratios is useful to analyze business performance with other similar firms, to compare with previous years performance and to compare with other firms in the same market

A company with callable bonds might buy back the bonds (call the bonds) from investors if prevailing interest rates decline. This is because the company could then re-issue the bonds at a lower interest rate.

True. The Company will try to take benefit of fall in interest rate by calling the bond and reissuing at a lower rate

What is the primary difference between the current ratio and the acid-test ratio?

The current ratio includes current assets while the acid-test ratio only includes cash and accounts receivable in the numerator.

In general, a firm wants to improve its Average Collection Period (ACP). An increase in the ACP would indicate that the firm is collecting receivables quicker.

False. because an increase ACP means that the company is allowing more credit to accounts receivable and easing of payment terms which increases ACP.  

The Profit Retention Ratio (also known as the Plowback Ratio) is used to estimate the growth of a firm. If an analyst estimated 6% growth for Magnavision Tech and the ROE is 15%, how much is the firm's Plowback Ratio?

Around 40%

Growth rate = Plowback ratio * ROE

6% = Plowback ratio * 15%
Plowback ratio = 40%

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