Fin 534 week 2 chapter 3
FIN 534 Week 2 Chapter 3
1. Which of the forthfuture announcements is CORRECT?
a. The bearing of long-term default to entirety excellent is past likely to habit seasonal fluctuations than is either the DSO or the list turnover bearing.
b. If two unshakens entertain the selfselfcorresponding ROA, the unshaken after a while the most default can be expected to entertain the inferior ROE.
c. An extension in the DSO, other things held perpetual, could be expected to extension the entirety proceeds turnover bearing.
d. An extension in the DSO, other things held perpetual, could be expected to extension the ROE.
e. An extension in a unshaken’s default bearing, after a while no shifts in its sales or unobstructed costs, could be expected to inferior the benefit-service edge.
2. Companies HD and LD entertain the selfselfcorresponding tax trounce, sales, entirety proceeds, and basic earning potentiality. Both companies entertain real net pays. Aggregation HD has a excellent default bearing and, hence, a excellent attention expenditure. Which of the forthfuture announcements is CORRECT?
a. Aggregation HD has a inferior equity multiplier.
b. Aggregation HD has past net pay.
c. Aggregation HD pays past in taxes.
d. Aggregation HD has a inferior ROE.
e. Aggregation HD has a inferior times attention earned (TIE) bearing.
3. Companies HD and LD entertain the selfselfcorresponding entirety proceeds, sales, unobstructed costs, and tax trounces, and they pay the selfselfcorresponding attention trounce on their default. However, aggregation HD has a excellent default bearing. Which of the forthfuture announcements is CORRECT?
a. Given this knowledge, LD must entertain the excellent ROE.
b. Aggregation LD has a excellent basic earning potentiality bearing (BEP).
c. Aggregation HD has a excellent basic earning potentiality bearing (BEP).
d. If the attention trounce the companies pay on their default is past than their basic earning potentiality (BEP), then Aggregation HD gain entertain the excellent ROE.
e. If the attention trounce the companies pay on their default is less than their basic earning potentiality (BEP), then Aggregation HD gain entertain the excellent ROE.
4. Muscarella Inc. has the forthfuture estimate quibble and pay announcement data:
Cash $ 14,000 Accounts payable $ 42,000
Receivables 70,000 Other vulgar liabilities 28,000
Inventories 210,000 Entirety CL $ 70,000
Total CA $294,000 Long-term default 70,000
Net unroving proceeds 126,000 Niggardly equity 280,000
Total proceeds $420,000 Entirety liab. and equity $420,000
Net pay $ 21,000
The new CFO thinks that inventories are undue and could be inferiored sufficiently to source the vulgar bearing to resembling the perseverance medium, 2.70, after a whileout forcible either sales or net pay. Assuming that inventories are sold off and not replaced to get the vulgar bearing to the target plane, and that the funds generated are used to buy tail niggardly store at tome compute, by how fur would the ROE shift?
5. Quigley Inc. is regarding two financial plans for the future year. Management expects sales to be $301,770, unobstructed costs to be $266,545, proceeds to be $200,000, and its tax trounce to be 35%. Under Plan A it would use 25% default and 75% niggardly equity. The attention trounce on the default would be 8.8%, but the TIE bearing would entertain to be kept at 4.00 or past. Under Plan B the ultimatum default that met the TIE toil would be occupied. Assuming that sales, unobstructed costs, proceeds, the attention trounce, and the tax trounce would all survive perpetual, by how fur would the ROE shift in tally to the shift in the excellent organization?