Question

2. A firm borrowed more money over the year and did not issue stock. The plowback ratio is 0. Profit margin and total asset turnover remained fixed. Which of the following statements must be true?

a. Equity increases

b. ROA increases

c. ROE increases

d. None of the above

3. Based on the principles of diversification, which of the following statements is true?

a. Adding additional stocks to your portfolio will reduce unsystematic risk

b. Adding additional stocks to your portfolio will reduce systematic risk

c. Adding additional stocks to your portfolio will reduce beta

d. Adding additional stocks to your portfolio will increase overall risk

4. A firm has fixed assets at the end of 2015 of $5000 and accumulated depreciation of 1,250. At the end of 2016, fixed assets are $5100 and accumulated depreciation is 1500. Which of the following must be true.

a. The firm purchases exactly 100$ in fixed assets in 2016

b. Net fixed assets increased over the year 2016

c. the net fixed assets at the end of 2015 were $6,250

d. the 2016 depreciation expense was 250

Answer 1

2.

None of the above

3.

Adding additional stocks to your portfolio will reduce unsystematic risk

4.

the 2016 depreciation expense was 250