Question

14.a company whose stock is selling at a P/E ratio greater than the P/E ratio of a market index most likely has____

a. an anticipated earning growth rate which is less than that of the average firm

b.less predictable earnings growth than that of the average firm.

c.greater cyclicality of earnings growth than that of the average firm.

d.a dividend yield which is less than that of the average firm.

e. none of the above.

15.which of the fllowing combinations will produce the highest growth rate? assume that the firm's projects offer a higher expected return than the market capitalization rate.

a. a high plowback ratio and a high P/E ratio

b.a high plowback ratio and a low P/E ratio

c.a low plowback ratio and a low P/E ratio

d.a low plowback ratio and a high P/E ratio

e.neither the plowback ratio nor the P/E ratio is related to a firm growth.

16.the level of real income of a fir, can be distorted by the reporting of depreciation and interest expense. during periods of high inflation, the level of reported depreciation tends to ____income, and the level of interest expense reported tends to _____income.

a. understate, overstate

b.understate, understate

c. overstate,overstate

d.overstate, overstate

e. there is no discernible pattern

17.given a current ratio greater than 1. if ending unventory is understated by$3,000 and begining inventory is overstated by $5,000, the effect on net income and the current ratio will be:

net income current ratio

a.understated by $2000 lower

b.overstated by $2000 lower

c.understated by $8000 lower

d.understated by $8000 higher

e.understated by $3000 higher

Answer 1

14)

A firm with low dividends will yield a higher a growth rate. High growth rate increases the share prices and pushes PE ratio up. It has inverse relationship with PE Ratio.

Hence, correct option is d. a dividend yield which is less than that of the average firm.