Question :
61. The term _____ describes financing with debt and preferred stock : 1230616
61. The term _____ describes financing with debt and preferred stock to increase the potential return to the residual common shareholders’ equity.
A. trading on the debt
B. trading on the equity
C. financial leverage
D. equity financing
E. none of the above
62. ROCE disaggregates into the following components:
A. Profit Margin for ROCE Ratio x Inventory Turnover Ratio x Debt Ratio
B. Profit Margin for ROCE Ratio x Total Assets Turnover Ratio x Debt Ratio
C. Profit Margin for ROCE Ratio x Inventory Turnover Ratio x Capital Structure Leverage Ratio
D. Profit Margin for ROCE Ratio x Total Assets Turnover Ratio x Capital Structure Leverage Ratio
E. Profit Margin x Total Assets Turnover Ratio x Debt Ratio
63. The profit margin ratio for ROCE indicates
A. the sales generated from each dollar of assets.
B. the portion of the sales dollar left over for the common shareholders after covering all operating costs and subtracting claims of creditors and preferred shareholders.
C. the portion of the sales dollar left over for the preferred shareholders after covering all operating costs and subtracting claims of creditors and common shareholders.
D. the proportion of total assets, or total financing, provided by common shareholders contrasted with the financing provided by creditors and preferred shareholders.
E. the proportion of total assets, or total financing, provided by preferred shareholders contrasted with the financing provided by creditors and common shareholders.
64. The total assets turnover ratio indicates
A. the sales generated from each dollar of assets.
B. the portion of the sales dollar left over for the common shareholders after covering all operating costs and subtracting claims of creditors and preferred shareholders.
C. the portion of the sales dollar left over for the preferred shareholders after covering all operating costs and subtracting claims of creditors and common shareholders.
D. the proportion of total assets, or total financing, provided by common shareholders contrasted with the financing provided by creditors and preferred shareholders.
E. the proportion of total assets, or total financing, provided by preferred shareholders contrasted with the financing provided by creditors and common shareholders.
65. The capital structure leverage ratio indicates
A. the sales generated from each dollar of assets.
B. the portion of the sales dollar left over for the common shareholders after covering all operating costs and subtracting claims of creditors and preferred shareholders.
C. the portion of the sales dollar left over for the preferred shareholders after covering all operating costs and subtracting claims of creditors and common shareholders.
D. the proportion of total assets, or total financing, provided by common shareholders contrasted with the financing provided by creditors and preferred shareholders.
E. the proportion of total assets, or total financing, provided by preferred shareholders contrasted with the financing provided by creditors and common shareholders.
66. The higher the capital structure leverage ratio, the _____ is the proportion of financing that common shareholders provide and the _____ is the proportion that creditors and preferred shareholders provide. Thus, the _____ the capital structure leverage ratio, the _____ is financial leverage.
A. higher; lower; higher; higher
B. lower; higher; higher; higher
C. higher; lower; higher; lower
D. lower; higher; higher; lower
E. lower; higher; lower; lower
67. Earnings per share equals
A. net income attributable to bonds and common and preferred stock divided by the average number of common shares outstanding during the period.
B. net income attributable to common and preferred stock divided by the average number of common shares outstanding during the period.
C. net income attributable to common and preferred stock divided by the end of period number of common shares outstanding.
D. net income attributable to common stock divided by the average number of common shares outstanding during the period.
E. net income attributable to common stock divided by the end of period number of common shares outstanding.
68. A firm with securities outstanding that holders can convert into, or exchange for, shares of common stock may report two earnings-per-share amounts:
A. primary and diluted earnings per share
B. basic and diluted earnings per share
C. primary and secondary earnings per share
D. basic and secondary earnings per share
E. primary and decreased earnings per share
69. When a firm has securities outstanding that, if exchanged for shares of common stock, would decrease basic earnings per share by _____ or more, generally accepted accounting principles require a dual presentation: basic earnings per share and diluted earnings per share.
A. 1 percent
B. 3 percent
C. 10 percent
D. 20 percent
E. 30 percent
70. Accountants and financial analysts criticize earnings per share as a measure of profitability because it does
A. not consider the amount of shareholders’ equity required to generate that level of earnings.
B. not consider the amount of liabilities required to generate that level of earnings.
C. consider the amount of assets required to generate that level of earnings.
D. not consider the amount of assets required to generate that level of earnings.
E. consider the amount of liabilities required to generate that level of earnings.
