1. Which of the following ratios will usually have the lowest percent? (ROI, ROTE, ROCE, ROTA, not enough info)

ROA

2. Which of the following items will be reported on the income statement as part of net income?

Gain from selling land will be reported on the income statement.

3. Noncontrolling interest in earnings is

minority share of earnings.

4. Which of the following could cause return on assets to decline when net profit margin is increasing?

Purchase of land at year-end could cause return on assets to decline when the net profit margin is increasing. The year-end purchase of land would not have contributed to profits.

5. Which of the following ratios usually reflects investors' opinions of the future prospects for the firm?

The price/earnings ratio usually reflects investor's opinions of the future prospects for the firm.

6. Which of the following ratios gives a perspective on risk in the capital structure?

Degree of financial leverage gives a perspective on risk in the capital structure.

7. The earnings per share ratio is computed for

common stock

8. Increasing financial leverage can be a risky strategy from the viewpoint of stockholders of companies having

having low and falling profits.

9. A firm has a degree of financial leverage of 1.3. If earnings before interest and tax increase by 10%, then net income

10% x 1.3 = 13%

10. The ratio that represents dividends per common share in relation to market price per common share is

Dividend yield represents dividends per common share in relation to market price per common share.

11. Book value per share may not approximate market value per share because

-investments may have a market value substantially above the original cost
-land may have substantially increased in value
-market value reflects future potential earning power
-the firm owns patents that have substantial value