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Here are some multiple choice questions for you accounting whizzes! : )
9. The price/earnings ratio:
A) is a measure of the relative expensiveness of a firm's common stock.
B) does not usually change by more than 1.0 (e.g. 8.2 to 9.2) during the year.
C) can be used to determine the cash dividend to be received during the year.
D) is calculated by dividing the earnings multiple by net income.
10. A higher P/E ratio means that:
A) the stock is more reasonably priced.
B) the stock is relatively expensive.
C) investors are wary of the stock.
D) earnings are expected to decrease.
11. When a corporation has both common stock and preferred stock outstanding:
A) dividends on preferred stock are paid only if the company has current earnings.
B) dividends on preferred stock must be paid before dividends on common stock can be paid.
C) preferred stockholders receive the same dividend per share as common stockholders.
D) dividends on preferred stock are paid only if dividends are to be paid on the common stock.
12. A management that wanted to increase the financial leverage of its firm would:
A) raise additional capital by selling common stock.
B) use excess cash to purchase preferred stock for the treasury.
C) raise additional capital by selling fixed interest rate long-term bonds.
D) try to increase its ROI by increasing asset turnover.
13. Financial leverage:
A) arises because most borrowed funds have a fixed interest rate.
B) arises because most borrowed funds have a variable interest rate.
C) usually has no bearing on the risk associated with a company.
D) is a concept that does not apply to individuals.
14. Which of the following is(are) an example of a measure of leverage?
A) Debt yield.
B) Debt payout ratio.
C) Preferred dividend coverage ratio.
D) Debt/equity ratio.
E) All of the above.
15. If a firm's debt ratio were 25%, its debt/equity ratio would be:
A) 25%.
B) 50%.
C) 33.33%.
D) 75%.
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Vacares rules.
"Usually only fat guys have the kind of knowledge and ability that Kristin has."
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